Barnes & Noble Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of the nation's largest book chain Barnes & Noble (NYSE: BKS  ) surged 30% on Friday after announcing that Liberty Media (Nasdaq: LCAPA  ) offered to acquire it for about $1 billion.

So what: The all-cash offer values Barnes & Noble at $17 per share and represents a 20% premium to its Thursday closing price. Barnes has been on the selling block for almost a year now in the face of intense digital competition, but with the solid backing from a new-age media conglomerate like Liberty, its eBook platform should be able to hang a lot better with the likes of Amazon (Nasdaq: AMZN  ) and Apple (Nasdaq: AAPL  ) .

Now what: I'd be cautious about chasing the stock right now. While the reaction from Barnes investors reflects expectations of a higher offer, there's still no guarantee that the proposal will even lead to a final transaction. Given the risks that still remain of the deal falling through (however small), not to mention Barnes' questionable stand-alone qualities, taking some money off the table seems prudent.

Interested in more info on Barnes & Noble? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended Amazon and Apple. The Motley Fool owns shares of Apple and Motley Fool newsletter services have recommended creating a bull call spread position in it. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On May 20, 2011, at 2:11 PM, SoothSayer224 wrote:

    This is the first 'positive' article that fool has posted regarding BKS. Shares have to jump 30+% in one day to have them pull back? Yet still somehow they beg the investor to be extremely cautious despite many analysts saying $21 a share is more reasonable as opposed to the $17 offered now. There were 5+ negative articles written around BKS on fool.com in the last few weeks leaving me to question all of the authors agenda.

  • Report this Comment On May 21, 2011, at 7:51 AM, Zaneyjaney wrote:

    @ SoothSayer

    Looking at where competitor Borders and other book sellers went, is it all that unreasonable for many to consider similar dangers for BKS?

  • Report this Comment On May 21, 2011, at 4:37 PM, kthup wrote:

    Yes, the handful of writers on this site who write about BKS are almost always negative. If they were writing from a position of authority, their opinions would be concerning. But they write undisguised bias, they are poorly informed, and their understanding of the business is insufficient.

  • Report this Comment On May 25, 2011, at 12:51 PM, hot1053 wrote:

    Sooth, what agenda? If BKS's fundamentals were strong, they would have never dropped.

    Here are the problems with the company:

    1. It's a huge bricks and motar operation in an increasing E-commerce world.

    2. It didn't give guidance into the future. That's why the stock dropped imo. If you can't even give earnings guidance on a company that has existed for years, there is usually something really wrong because it's incredibly irresponsible for any public company to not to guide.

    BKS's shareholders who should file a class action suit against the company and demand an investigation of top management before considering a buyout.

    Maybe BKS executives wanted to be owned by this buyer, but the buyer didn't want to pay in the 20's? Why not refuse to give guidance when all is well?

    I find it hard to believe that a company would buy a company who didn't give guidance unless they know something that we don't.

    Bottom line, BKS shareholders have been burned by the management whether or not the company is bought. If bought, management may get sweet bonuses to stay aboard. Stay tuned to that bit of information that may or may not be a footnote of a possible merger.

    There's no point of closing my short on CAPS since the stock is overpriced due to an expectation of another buyer coming to the table. Any buyer without inside information an BKS would be foolish to bid on it. Something isn't right. Something may not be legal. At the very least something is not ethical.

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