Everybody knows that Barnes & Noble (BKS) has seen better days. But are things at the retail chain so bad that it would contemplate a takeover bid from an asset management firm with less than $1 million in discernable assets?
Shares of the bookseller soared on Friday after news that G Asset Management, a previously unknown asset manager, submitted a conditional offer to buy 51% of the company's outstanding stock for $22 per share, a 31% premium to Thursday's closing price. The proposal values the company at $1.3 billion and means that the asset manager would be on the hook for an estimated $661.5 million.
As an alternative, G Asset Management said it would be willing to take a 51% stake in Barnes & Noble's Nook unit -- thereby valuing the division at $5 a share -- if it failed to secure a majority stake in the retail chain itself. The catch is that both offers are conditioned upon financing, which, if I might be so bold, appears to make it a dubious proposition at best.
By all accounts, G Asset Management is a completely unfamiliar entity. Its website lists president and chief investment officer Michael Glickstein as the sole employee. According to a recent filing with the SEC, "The principal business of GAM is that of an investment manager engaging in the purchase and sale of securities on behalf of private investment partnerships and certain managed accounts."
On $BKS, G asset mgmt runs very little money and I mean very little. Not sure if he lives at home with his parents, but you get the idea.— DAVID FABER (@davidfaber) February 21, 2014
As for Glickstein's experience, his online bio cites previous research positions at Pequot Capital, Mercer Partners, and Goldman Sachs, as well as serving as the "president of the Michael Price Student Investment Fund" during graduate school and conducting an "independent study with valuation expert Professor Aswath Damodaran on the capital cycle investing framework."
Perhaps most telling are the few details to be gleaned from the investment company's past and current holdings. In terms of the former, the only filings in the SEC's EDGAR database refer to a January 2012 position in Eastern Light Capital, a real estate investment trust that was delisted from the New York Stock Exchange one month later for "failure to meet the exchange's continued profitability and shareholder net worth requirements."
Before the delisting, G Asset Management had a 5.8% ownership stake in the company valued at $46,889, or $1.35 a share. By the following March -- that is, one month after Eastern Light Capital was booted from the NYSE -- S&P's Capital IQ shows that G Asset Management sold its position for $1.10 a share. If true, that would equate to an 18.5% loss.
In terms of its current holdings, public records indicate only one of these as well. Again, according to S&P's Capital IQ, G Asset Management owns a 4.06% stake in Manhattan Bridge Capital, a small financial company that purports to offer "short-term, secured, and non-banking loans to real estate investors to fund their acquisition and construction of properties in the New York Metropolitan area." At Friday's closing price, G Asset Management's stake in Manhattan Bridge Capital is worth somewhere in the neighborhood of $350,000.
The one other thing we can say with a high degree of certainty is that Glickstein has had his eyes on Barnes & Noble for quite some time. In his sole posting on Seeking Alpha, he argued in December 2011 that "formally splitting [the company] into three separate businesses would create substantial shareholder value." He was particularly bullish on Barnes & Noble's e-book business saying that "It is our belief that a spin-off or equity carve out of the e-reader business would create the only e-reader pure-play and would have substantial value to technology investors, who currently have few other avenues to invest in this theme."
What are investors to make of all of this? To be fair to Glickstein, perhaps he does indeed have access to the necessary, though until-now unknown, capital resources. By the looks of it, this seems unlikely, but you never know. I suppose stranger things have happened. That being said, if you're on the hunt for an M&A arbitrage opportunity, you should probably look elsewhere for something that has a greater -- or, for that matter, any -- likelihood of success.