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Borders Bankruptcy: Blow to Bill Ackman, Bennett LeBow

Bloomberg News
Bill Ackman

READ: Everything You Need to Know about the Borders Bankruptcy.

Bill Ackman and Bennett LeBow are respected financiers with lengthy track records of investment success. But with Borders Group now tipping into bankruptcy protection, the bookseller will stand out at an unfortunate flub for Ackman and LeBow.

Ackman, who has pushed in to shake up Target Stores, J.C. Penney and Fortune Brands, also looked to do the same at Borders. He owned 10.6 million shares of Borders stock as of Dec. 31, according to a regulatory filing this week.

Four years ago, around the time Ackman first started buying Borders stock, those shares would have been worth $233 million. Today, his stake has lost 99% of its value, down to $2.4 million.

“It wasn’t a good investment,” Ackman told Deal Journal.

The hedge fund manager previously joked that the terrible performance of his Borders investment leaves him as a “stuck” holder – rather than a stock holder – in the bookstore chain. In December, in what now looks like a last-ditch effort to rescue his equity investment, Ackman offered to finance a $960 million combination of Borders and Barnes & Noble.

Another big loser: Financier and tobacco magnate LeBow. Last May, he made a relatively cheap (for him) $25 million bet on Borders in return for a big slug of stock and warrants that pay off if Borders stock climbs above $2.25 a share. With Borders now looking at a share price of just pennies per share, LeBow likely has lost his entire investment. LeBow also was captain of the sinking ship: He had himself appointed himself as CEO last summer.

“It would premature for Borders to speculate as to the outcome of the Chapter 11 process for equity holders,” the company said.

– Jeffrey A. Trachtenberg contributed to this post.

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    • His investors also got killed on Target. All make mistakes , but Borders simply had to redesign their stores. If they closed their music and DVD sections, and invited a retailer like Apple Computer to take the retail space, they would of collected rent, had a successful cafe section, and still sold books and magazines. Currently the public is not rushing to buy books. CD and DVD”s are passe. Look at Blockbuster. The key to the success of large book stores is to rent out some of their space.

    • and LeBow never once stepped foot into the corporate offices of Borders. You would think that since he bought the title of CEO, he’d at least like to come there to meet the people who actually cared about the company. Not so much.
      These two are perfect examples of what’s wrong with corporate America.

    • Ackman is a hack….couldn’t happen to a nicer guy!

    • “with all due respect, I dont feel the least bit sorry for either of these two people. my concern is more with the real people that this article should have been about; the people about to be unemployed.”

      This is the Wall Street Journal. The article will obviously be about the CEO’s, not the actual employees that make them their money.

    • Yes, I agree. The buy stock in a bookstore is a dumb move anyway.
      Jerry Goldmann

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