Borders CEO Faces Uphill Battle to Win Over Investors
Over the next 28 days, Borders reported dismal fourth-quarter earnings, appointed LeBow as CEO of Borders Group, laid off a third round of employees and touted a digital future -- but investors clearly aren't convinced LeBow's arrival signifies good news for the company.
As Bloomberg News reported late Friday, Borders stock ended trading at $1.61 a share, which devalued the 11.1 million shares LeBow bought to become the company's primary stakeholders by nearly 30%. Granted, that's nowhere near as bad as the $1.26 a share the stock dipped to on June 9 -- a likely reaction to LeBow adding CEO to his list of executive positions -- but after a quick rebound to as high as $1.92 on June 14, it's been mostly downhill ever since.
Stock Drop Related to CEO's Background?
Standard & Poor's analyst Michael Souers explained the stock drop to Bloomberg as relating to LeBow's background: "Anytime you get management coming in from sectors that are completely different than what they are currently doing, there is a tendency for investors to second-guess that."
And while that line of thinking is technically correct, that didn't stop investors from driving up Borders' stock price -- once under $1 a share for so long it was nearly de-listed from the New York Stock Exchange -- to more than $3.60 a share at this time last year, when the man in charge was Ron Marshall, who was with a private equity company just after turning around Pathmark, the New York/New Jersey regional supermarket chain.
Investors are more likely second-guessing LeBow's specific background -- a checkered history of failed hostile takeovers of larger companies, funneling company money for personal use, and many rounds of litigation -- which doesn't exactly inspire confidence of a robust future for Borders. Giving Chief Financial Officer Mark Bierley the added title of chief operating officer won't do much to alter opinions, either.
At this point, barring a miracle or serious trouble at the company's larger competitor, Barnes & Noble (BKS), the stock decline won't reverse itself anytime soon.