Borders expects that outstanding shares of its common stock will be cancelled and extinguished upon confirmation of a Chapter 11 plan by the United States Bankruptcy Court for the Southern District of New York, the company said in a Securities and Exchange Commission filing which follows its agreement to sell itself for $215.1 million to Direct Brands.
If the bankruptcy court approves of its plan, the company's shareholders will not be entitled to any payment or property for their stock, and so Borders expects that its currently outstanding common stock will have no value, it said.
Its stock finished the day trading over the counter at $0.07 per share, after opening at $0.09 per share. It was trading at a high of $0.24 yesterday morning.
Borders, however, warned in its filing yesterday that trading prices may bear little or no relationship to the actual recovery, if any, by holders in our Chapter 11 bankruptcy proceedings. Accordingly, the company urges extreme caution with respect to existing and future investments in its common stock.
Direct Brands -- a media products company that counts the Book of the Month Club and Doubleday Book Club among its assets -- also agreed last week to take on about $220 million worth of Borders' liabilities with its stalking horse bid, or the bid that Borders prefers for its court auction on July 19.
The news was first reported by The Detroit News. The nation's second-largest bookstore chain is based in Ann Arbor, Michigan.
Edward B. Colby is the Books editor of the International Business Times. He can be reached at email@example.com.