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Why Barnes & Noble Inc. Stock Surged Today

By Jeremy Bowman - Oct 4, 2018 at 11:44AM

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Shares of the bookseller spiked after the company said it could possibly be sold.

What happened

Shares of Barnes & Noble Inc. (BKS) were rallying today after the struggling bookseller said it would look into strategic alternatives for the company, which could include a sale or going private. Not surprisingly, the stock spiked on the news, with shares up 20.6% as of 10:54 a.m. EDT.

A blurry image of a woman reading a book in a Barnes & Noble store.

Image source: Barnes and Noble.

So what 

In a press release, the retailer said it would "enter into a formal review process to evaluate strategic alternatives for the Company," adding that a number of parties have expressed interest in buying the company, including Chairman Leonard Riggio. 

The company also said it had observed the rapid accumulation of stock by an unidentified party and would adopt a "poison pill" shareholder rights plan in order to prevent a hostile takeover of the company.

This is not the first time that the bookseller has sought a sale. The prospect has come up several times since the financial crisis, as the company has been unable to grow or deliver meaningful profits. A separation from the education division in 2015 has not helped the core retailing segment. 

Now what

Given the prospect of a sale, today's pop is certainly justified. At this point, there seems little likelihood of a significant turnaround in the business, as Amazon has come to dominate the book industry. In its most recent quarterly report, Barnes & Noble said comparable-store sales fell 6.1%, and its per-share loss widened to $0.23. With numbers like that, shareholders should be hoping for a sale. Expect more volatility from the stock as news comes out about a potential deal.

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Stocks Mentioned

Barnes & Noble, Inc. Stock Quote
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