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Having tried unsuccessfully to find a buyer, struggling bookseller Borders Group (NYSE: BGP) was contractually obligated to give Pershing Square Capital, a hedge fund controlled by William Ackman, warrants to acquire its stock. Stifel Nicolaus & Co. analyst David Schick wrote the move will likely dilute shareholder by as much as 9%.The stock is trading up about 3% today, and the Associated Press described the warrants as "potentially giving its largest shareholder even more reason to push the bookseller toward a sale."
I'm not so sure. While it's true that Ackman now has more to gain from a sale with a significant premium, the cost to a potential acquirer also goes up because of the increase in the number of shares. And given that Ackman already controls 29% of the company's stock, it seems doubtful that he needs any additional incentive to push for increased shareholder value.
More likely, Borders has been unable to sell itself because no one wants to buy it.
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