Borders' Bankruptcy & William Ackman

Back in early December- could it be that long ago?- I wrote this post regarding William Ackman's Pershing Square's attempt to have Barnes & Noble merge with Borders, one of his firm's holdings. I wrote, in part,


"It's unclear to me why Ackman has so diligently and doggedly pursued either physical book retailer over the past few years. With Amazon and Google targeting the space, and Apple's recent iPad adding to the mix, it wouldn't seem to be an easy product/market in which to earn substantial gains by maneuvering with the remaining two, damaged retailers, would it?



Ackman has a track record as a smart investor. But, then, so did Ed Lampert before his plunge into owning retailers K-Mart and Sears.


Why on earth would anyone have bought into these turkeys even as long as three years ago? Their underperformance has only increased since then.



I suppose Ackman has a very short-term, 'turnaround' sort of mentality that seeks a quick, abrupt rise in share price from an unexpected reorganization, followed by a hasty exit from his positions.


I'm just not seeing the logic to this situation for Ackman, other than desperation to rescue some value from his 1/3+ ownership of the worse-performing, lesser-sized turkey in the sector."


Perhaps I was more prophetic than I knew. This past weekend's edition of the Wall Street Journal carried the news of Borders' Chapter 11 filing. According to the article,


"Mr. LeBow, who became CEO of Borders Group last year, invested $25 million last May as Borders tried to rework its finances. Mr. Ackman's Pershiing Square Capital Management LP is expected to lose at least $125 million in its investment."


Since I don't follow Borders, I had no idea Ben LeBow had become involved. Seeing LeBow and Ackman lose at least $130MM in this turkey is surprising. Especially since LeBow's investment was so recent. Ackman's investors can't be happy to have read about this over the weekend, can they?

Why do these investors with such great reputations get involved with one of the worst companies in a market segment? Ackman is also involved with Penney's, hardly a leading retailer, either.

The Journal piece catalogued Borders' decline and fall, amidst a general shrinking of the sector. Considering its ills, I really can't comprehend why these two marquee investors got involved with the firm.

I haven't followed LeBow's moves for years, but Ackman makes generous use of CNBC, so he's much more visible.

Let's see...the failed Target deal, then Borders, now Penneys. Is he losing his touch?