Yesterday Borders Group stock rose 9.8% and closed at $23.65 a
share on trading volume of 4.4 million shares, almost five times the
usual volume, after Bill Ackman, managing partner of hedge fund Pershing Square Capital
Management, called Borders stock "cheap" and said the firm had taken an
11% stake in the bookseller. He also predicted Borders shares could rise 50% to $36 a share in 18 months.
Ackman has bought parts of McDonald's and Wendy's
and agitated for major changes in those companies. In the case of
Borders, Ackman seems to have a more passive, admiring approach. "We
don't want the company to be sold," Ackman told Dow Jones. "We think
it's worth a lot more money if the company gets a chance to implement
their plan." He praised new CEO George Jones.
Pershing Square also owns about 8% of B&N. Ackman told Dow Jones
that results at both chains recently have been hurt by short-term
factors: "No Harry Potter book this year--that sort of thing." He
called the two companies "undervalued" and said, "We like the business.
People go to these places for an experience.
It's not just about buying a certain book."
The boost in Borders stock yeserday is reminiscent of a 7.2% jump to $20.60 a share
that occurred in early September after a Credit Suisse report lauded
Borders and its new CEO (Shelf Awareness, September 10, 2006).