Barnes & Noble Is Doomed, Even Its Chairman Is Abandoning Ship

The chairman and largest shareholder of Barnes & Noble (NYSE: BKS  ) has two options.

First, as captain of the world's biggest bookseller, he could allow his considerable investment in the company to go down with the ship. Or second, he could quietly extract his stake while assuring fellow passengers that nothing's amiss.

Which do you think he's chosen to pursue?

Leonard Riggio is abandoning ship
Barnes & Noble reported on Wednesday that Leonard Riggio sold 3.7 million shares of the company's stock. The transaction sliced his stake by almost a quarter, and leaves him with beneficial ownership of 12.1 million shares, or 20.1% of Barnes & Noble's outstanding stock.

The move, according to Riggio, had nothing to do with the ailing bookseller's prospects. It was done for estate-planning purposes, he said, adding that he has no plans to sell more stock in 2014.

"In my mind, the story isn't yet written as to where this is all going," Riggio told The Wall Street Journal a few weeks ago. "There's promise to it."

But herein lies the problem. It wasn't but five months ago that he made the same claim after cutting his stake by 2 million shares. At the time, he said it was for tax-planning purposes and announced that he didn't have "any intentions of selling more shares."

Just to be clear, I have no doubt that Riggo does indeed have considerable tax- and estate-planning issues to address. And I also have no doubt that selling his stake in Barnes & Noble would be beneficial to both.

But these objectives aren't mutually exclusive with what I believe to be his complete loss of faith in the company. If anything, in fact, they go hand in hand, as Riggio's estate would be reduced to a fraction of its current size if his position in Barnes & Noble eventually imploded with the rest of the company.

My point is that Riggio is abandoning ship. Yes, he may be doing it for tax reasons. And yes, he may be doing it for estate-planning purposes. But ultimately, he's doing it to salvage his own net worth.

Will you be left rearranging the chairs on the ship deck while Riggio slips away in a lifeboat? I hope not.

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Comments from our Foolish Readers

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  • Report this Comment On April 18, 2014, at 5:03 PM, avengergirl2010 wrote:

    What an exaggerated title. Hater much!?! The reason Riggio sold stock before was tax purposes etc. If he was abandoning BN he would have sold all his shares. Same thing with Liberty media yet they still have 10% shares still with more room for BN to work on a strategic move according to Liberty management, and Riggio is still the top shareholder for BN. Maybe instead of writing bad reporting you would try supporting the company knowing they are the last major bookstore left and seeing how MF now has stock in BN. I can't take this piss poor article seriously.

  • Report this Comment On April 18, 2014, at 7:33 PM, JohnMaxfield37 wrote:

    avengergirl2010,

    Some things to consider:

    (1) Barnes & Noble's Retail CEO told The Wall Street Journal at the end of January that the company is planning to close a third of its stores over the coming years. Meanwhile, Amazon has the ebook and online book businesses locked up, leaving B&N nowhere to go.

    (2) Barnes & Noble has now recorded five consecutive quarters of same-store sales declines.

    (3) Combined with Riggio's stock sale in December, he has now sold 33% of his stake in B&N -- the lion's share of which he did four months after implying that he wouldn't. This isn't laudable behavior for the chairman of the board.

    (4) Riggio sold his latest block for $17.30 per share on a day that it traded between $18.31 and $18.77. Accepting that big of a discount isn't something that an optimistic investor would do.

    (5) While Barnes & Noble spun Liberty Media's sale as a positive development, it wasn't. That was just the PR Department doing its job.

    For the record, like you, I have no interest in seeing bookstores close up shop.

    John

  • Report this Comment On April 19, 2014, at 1:24 PM, HappyEndingz wrote:

    Interesting Situation.

    Fool Analyst Jim Gilles has a different view of B&N wherein investors may actually make a few bucks:

    http://www.fool.com/investing/general/2014/04/09/roundtable-...

    "Meanwhile, Retail is a cash cow, producing an estimated $235 million free cash flow over the past year...

    I estimate a potential split-up and separate buyouts of the divisions would fetch 50% or more than the current share price."

    So, maybe the stock sales today are a way to finance a bid for the company later this year?

    Michael Dell bought out Dell Computer last year when things where looking bleakest for computer sales/earnings and investors who bought into the fear made a good return.

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