Borders Bankruptcy A 'Low-Probability Event'?

04/06/2010 05:12 am ET | Updated May 25, 2011

Borders stock prices rose significantly on Tuesday evening when major investor Bill Ackman declared on CNBC that the company's bankruptcy was a "low-probability event." Soon after the statement, Borders stock rose 37%.

The statement was a surprise to many who have believed that the bookstore chain has been heading towards bankruptcy for a long time. Just days earlier, the Wall Street Journal notes, Borders announced a major series of layoffs, just the most recent in a particularly bad year for the company.

Just weeks ago, Borders CEO Ron Marshall resigned, after working with the company for only one year. Marshall's resignation led many to wonder if the company was headed towards bankruptcy. Stock shares have been lower than ever over the past year, and the bookstore had a "disappointing" holiday season, according to Marshall.

So are things really looking up for Borders? Or was Ackman's statement a last-ditch effort to boost stock prices, as the New York Post suggests? The Post quotes analyst Michael Souers, who says that the statement should be taken with "a grain of salt," because, perhaps, "the financier is looking to salvage his big position in the shares."