market folly

In a Form 4 filed with the SEC last evening, we see that Bill Ackman's hedge fund firm Pershing Square Capital Management has received warrants to purchase shares of common stock in Borders Group (BGP). The transaction date was May 21st and the warrants expire October 9th, 2014 with a conversion price of $0.65. Pershing received warrants to purchase an aggregate of 2,701,837 shares of BGP. Additionally, due to an adjustment, Pershing's hedge funds will also be issued warrants to purchase 8,542,399 shares of common stock. Since Pershing's hedge funds have ownership interests in BGP Holdings, Ackman's funds have exposure to a total amount of 17,401,837 warrants. As of March 31st, we saw that Ackman owned 10,597,980 shares of common stock when we looked at Pershing Square's portfolio.

As per Pershing's recently filed 13D on BGP, we see that Ackman's firm has a 31.5% ownership stake in the company with an aggregate amount of common stock beneficially owned totaling 27,999,817. Ackman's Borders exposure also includes cash settled total return equity swaps covering 4,376,163 notional shares of common stock which are not included in the above totals. As such, Pershing's aggregate economic exposure to Borders Group is then 36.4%. For background on Bill Ackman, check out our profile of Pershing Square.

Taken from Google Finance, Borders Group is "an operator of book, music and movie superstores and mall-based bookstores." If you want to learn more about Ackman and his investing style, he is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff.