Investors Drop Barnes & Noble, Following Liberty Media

Liberty Media exits its investment in Barnes & Noble -- here's what investors need to know

Apr 3, 2014 at 7:00PM

U.S. stocks were little changed on Thursday, as the benchmark S&P 500 climbed down a bit from yesterday's record high with an 0.1% loss. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) was flat on the day. Meanwhile, shareholders of Barnes & Noble  (NYSE:BKS) wish they could say the same – the book retailer's stock fell 13.5% on news that one of its largest investors has sold virtually its entire investment (article follows below picture).


Source: Barnes & Noble

And just when things were going so well... shares of Barnes & Noble have had a terrific run so far this year, up nearly 50% as of yesterday's close, and near their five-year high.That momentum experienced a brutal reversal on Thursday, however, as Barnes & Noble and Liberty Media (NASDAQ:LMCA) announced that the latter has sold all but 10% of its preferred share investment to institutional investors. As part of the sale, Liberty Media president and CEO Greg Maffei will leave the Barnes & Noble board on April 8, the date of the closing.

In August 2011, Liberty Media paid $204 million for Barnes & Noble preferred shares paying a 7.75% dividend after dropping its $17 per-share bid to acquire the company. The preferred shares were convertible into 12 million common shares of Barnes & Noble at $17 per share (at the time, the 12 million shares represented a 17% stake in the company). As part of the investment, Liberty Media also obtained two board seats that were filled by Greg Maffei and Mark Carleton, a senior vice president. Mr. Carleton will remain on the board.

Liberty Media tried to put a positive spin on their exit, with Mr. Maffei explaining that, "by reducing our preferred position and eliminating some of our related rights, Barnes & Noble will gain greater flexibility to accomplish their strategic objective." The preferred shares investment gave Liberty Media a right of veto over any asset sales.

Nevertheless, there is no way to interpret this as anything but a vote of no-confidence with regard to the bookseller's long-term prospects. Otherwise, Liberty Media would presumably see an opportunity in switching its preferred shares for common shares at a conversion price of $17 per share -- seemingly favorable terms with the shares more than $22 (that's where they were before today's announcement, at any rate). As it is, Liberty Media will have done decently on its investment -- the Financial Times' Lex column estimates the rate of return on the preferreds at 12% (although it's far from clear that is adequate compensation for the time and effort involved).

The challenge for Barnes & Noble is its Nook electronic reader division -- which is reportedly what had attracted Liberty Media to the company in the first place. Trying to offer a competing product to the Kindle or the iPad was a complete non-starter, and the Nook has run up hundreds of millions in losses in the process. Despite this, Barnes & Noble's core retail and college bookstores, though a declining business, remains stubbornly profitable. If Barnes & Noble were to resolve its Nook problem, the core business could still have some juice in it. Still that's a big if. Typically, I don't recommend investors bet on turnarounds, and I'm not going to stray from that line here.

Forget Barnes & Noble, here are two stocks changing the retail world
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool owns shares of Barnes & Noble and Liberty Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers