Shareholder activist Bill Ackman has raised his stake in Borders Group to 22 percent, even as the book retailer’s shares sink near 52-week lows.
Additional purchases in recent weeks have enlarged Ackman’s stake in the struggling book chain from 17 percent in November, when Ackman said he was betting on a turnaround by incoming CEO George Jones. But Ackman also met with Borders officials last year to discuss corporate governance issues.
“We’re pleased that Mr. Ackman has confidence in our strategic plan, as evidenced by his ownership of the stock,” said Borders spokeswoman Anne Roman. She declined to comment on whether Ackman has spoken with Borders management recently.
Ackman’s hedge fund, Pershing Square Capital Management, now owns 10.6 million Borders shares, having purchased them at an average price of around $16.50, according to securities filings yesterday. In addition, the fund has entered into swap contracts in recent weeks that allow it to purchase 2.2 million more shares at around $10.
The shares have continued to dive in recent weeks amid broad fears about slowing consumer spending, putting Ackman’s investment deeper under water. Yesterday, Borders’ stock closed at $9.80, not far off a 52-week low of $9.09 set earlier this month.
Jones, a former Saks Fifth Avenue executive who took the helm at Borders last July, increased promotions in the fall amid fierce competition with No. 1 rival Barnes & Noble. This year, Jones is looking to make stores easier to shop, and link them more closely to online shopping channels.
Although Borders’ strong cash flow might have made it a good candidate for a buyout, Ackman said in the fall that he preferred it remained public during its turnaround. Ackman has said Borders shares have been hit unfairly by short-term worries and overblown concerns about the threat of competition from Amazon.com.
Investors have speculated that Ackman might be angling for a merger between Borders and Barnes & Noble, in which Ackman also owns a stake.
Ackman has previously taken big positions in other chains like McDonald’s and Wendy’s, prodding management to cut spending, sell assets, or take on debt to fund share buybacks.
Pershing Square also owns big stakes in Sears and Target. In September, Target said it would consider selling its credit-card unit.