Liberty Media and Barnes & Noble Part Ways

Liberty Media announced that it was giving up the majority of its stake in Barnes & Noble, sending the bookseller's shares down heavily.

Apr 8, 2014 at 7:00PM

In August 2011, Barnes & Noble (NYSE:BKS) was in a rough spot. The company's stock was below $10 after having almost touched $50 in 2006. Enter Liberty Media (NASDAQ:LMCA) and Chairman John Malone. The leadership at Liberty thought the bookseller's Nook had huge potential as a tablet, reader, and software platform for other devices.

Those dreams turned into brutal reality over the next two-and-a-half years, and last week Liberty sold off most of its shares in Barnes & Noble.

Liberty backs away from Barnes & Noble
While Liberty will keep roughly 10% of its original stake in the bookseller, the majority of its position has been sold to qualified institutional buyers. That means Liberty won't have the authority to appoint members to the board, although one of its members will stay on after being recently reelected. Liberty CEO Greg Maffei said in the press release that the company looks forward to "maintaining its relationship with [Barnes & Noble]." 

The obvious shortfall for this relationship is in the Nook's performance. Sales have been down, staff has been cut, and the path forward has been shrouded in shadows and mist. Barnes & Noble has largely remained committed to the platform and has announced a new Nook coming in fiscal 2015, but the grandest of hopes ran into the brick wall that is the tablet marketplace.

Nook's image issues
After a strong start, the Nook has fallen behind Amazon's Kindle line and Apple's iPad in market share. The Nook seems to be suffering from its success as an e-reader brand. That's left it behind in the tablet race, where Amazon and Apple have made themselves out to be the do-all, be-all device manufacturers.

Liberty's vision for the Nook was bigger than just being another brick in the wall. In early discussions, Malone thought the Nook would succeed on QVC, help lead Barnes & Noble's digital revolution, and break into the tablet market with ease. For the past year, it's been clear that none of those things were going to happen, and it's been only a matter of time until Liberty bowed out.

Barnes & Noble will still have a small relationship with Liberty, as the media company is holding on to 1.7% of the bookseller. The lack of a Liberty seal of approval has already spelled bad news for Barnes & Noble investors, though, and the company's stock fell sharply on the news. While it may not change the immediate future of the business, there was a lot to be said for having Liberty's backing. It's not clear who Barnes & Noble can turn to for backing now.

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Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com, Apple, 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.

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