Hedge fund financier acknowledges $125 million loss on Borders investment
One of the top investors in Ann Arbor-based Borders Group Inc. acknowledged that his New York-based hedge fund has lost $125 million on its investment in the book store chain, Bloomberg BusinessWeek is reporting.
Activist investor Bill Ackman of Pershing Square Capital Management "admits" the Borders investment was a mistake, the magazine says in a lengthy profile story.
The statement may serve as an acknowledgment that Borders can't avoid filing for bankruptcy protection, a move that would almost surely wipe out the equity of all shareholders. Borders is believed to be close to filing for bankruptcy.
Borders' entire market capitalization — the value of all of its stock — is less than $30 million.
Ackman told CNBC in February 2010 that there was a "low probability" of a bankruptcy filing. In December, he announced that he would be willing to help finance a Borders bid to acquire Barnes & Noble and merge the retailers, but analysts mostly didn't like the idea.
Other investors who stand to lose millions in the event of a Borders bankruptcy filing include activist investor Bennett LeBow, who plowed $25 million into Borders in May and became CEO of the company a month later.
Borders, facing a cash crunch, said in January that it had secured a tentative financing deal from GE Capital. But the deal was contingent upon securing additional concessions from publishers as well as more outside financing.
Borders employs about 550 workers at its Ann Arbor headquarters and 19,000 overall. The company's stock (NYSE: BGP) was trading at $0.41 this morning, up $0.04 on the day.