What happened

Shares of book retailer Barnes & Noble, Inc. (NYSE:BKS) jumped as much as 18.9% in trading midday Thursday, after The Wall Street Journal reported the company might be taken private. Some of the excitement died down later in the day, and at 2:50 p.m. EST shares were only up 9.1% on the day.

So what

Reports are that Sandell Asset Management has proposed taking Barnes & Noble private for about $750 million, including debt. If true, the buyout could take place at about $9 per share, a significant premium from yesterday's closing price of $6.60.

Woman taking a book off a shelf

Image source: Getty Images.

Barnes & Noble isn't exactly a strong company, reporting a 6.6% decline in revenue and a $10.8 million loss in the fiscal first quarter of 2018, but its financials are improving. An activist taking the company private could conceivably complete a turnaround without the scrutiny of public markets, although these reports are not confirmation that any offer is on the table.

Now what

Buying on speculation of a buyout is risky, so this isn't a stock I would jump into today. A deal could fall apart, or reports of an offer could be wrong. What investors should look for are companies with fundamental business strength; if a buyout occurs and provides a premium to the current share price, that's great. However, Barnes & Noble is anything but stable, so even if a buyout does happen, it's not something I'm willing to bet on.

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.