Why Barnes & Noble Shares Tumbled

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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: Shareholders of book and online-content company Barnes & Noble (NYSE: BKS ) are getting a rude surprise, with shares down as much as 12% after one of its major shareholders announced it will be distributing its stake in the company.

So what: Yucaipa Holdings' Ron Burkle noted in a statement filed with the Securities and Exchange Commission today that it would "distribute in-kind the shares of [the company's] common stock." Although Barnes & Noble doesn't allow any one holder to attain more than 20% of its common stock, Yucaipa's sale, as one of its largest shareholders, is bound to drag down the company's stock price.

Now what: The big news came earlier in May, when Microsoft (Nasdaq: MSFT ) made a $300 million investment in Barnes & Noble to get a Windows 8 Nook app. The separate company that will be developed will present some form of competition to Amazon.com's (Nasdaq: AMZN ) Kindle, but details on the spin-off are still emerging. What can be said is I echo Burkle's sentiment to head for the gates. Before the Nook, Barnes & Noble's sales were weakening as content turns increasingly more digital. Books will never go away, but that form of content continues to shrink in popularity. I think today is another stark reminder that Barnes & Noble is a poor investment.

Craving more input? Start by adding Barnes & Noble to your free and personalized Watchlist so you can keep up on the latest news with the company.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Microsoft and Amazon.com. Motley Fool newsletter services have recommended buying shares of Microsoft and Amazon.com, as well as creating a bull call spread position in Microsoft and writing puts on Barnes & Noble. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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