Dumpster Diving with the Borders Group

Borders Group, Inc.  (Public, NYSE:BGP) shares took a huge hit on Thursday, ending the day down 28% at $5.07 a share.  The news of Borders looking at "future strategies", thus selling the company made investors bail like no tomorrow.  Shareholders couldn't sell shares fast enough, 26.8 million shares were traded on Thursday, compared the usual volume of 1.44 million BGP shares.  So now what? Follow the Masters into the dumpster.

Borders fourth-quarter results that were delayed for one day,reported net income of $64.7 million, or $1.10 a share, compared with a loss of $73.6 million, or $1.22, in the same period last year. Revenue fell 2 percent to $1.35 billion for the quarter ended Feb. 2. Analysts polled by Thomson Financial expected profits of $1.42 per share on sales of $1.37 billion.

Borders has until Jan. 15 to require Pershing Square to pay $125 million for its international business. But the company said it must pursue the sale of those operations elsewhere before any deal with Pershing.

Borders is now considering options including the sale of the company or certain divisions, and that it had lined up $42.5 million in financing to help it keep running through the year.

In this tough economy, Borders is going to have a hard time staying in business when you go online and buy books at Amazon.com (AMZN), eBay.com (EBAY), or stroll into a better bookstore like Barnes & Noble, Inc.  (Public, NYSE:BKS).

For those of you thinking you can cash in on Borders dividend and wait for a potential sale, hoping shares may jump - think again.   Borders has suspended its quarterly dividend and all that bad news sent shares down 44% at one point.

Borders is a sitting duck now, with the recession in full swing, their shares are going to keep falling.  Borders isn't a great bookstore, they're no better than Costco's (COST) table of random books for sale pilled all over the place.  There's nothing special about strolling into a Borders, so why would book lovers keep heading to Borders? 

They won't.

The Masters expect the powers that be to push Borders shares to a new 52-week low next week. Depending how low they get, there may be a bounce opportunity, but for now, just watch the bonfire of books go up in flames.