Is Liberty Media Corp.’s (NASDAQ: LMCA) decision to reduce its stake in Barnes & Noble Inc. (NYSE: BKS) a matter of stepping aside so the bookseller can spread its wings and fly again, or is it essentially throwing in the towel on the company it once wanted to buy outright?

Greg Maffei, president and chief executive officer of Liberty Media, said in the announcement:

By reducing our preferred position and eliminating some of our related rights, Barnes & Noble will gain greater flexibility to accomplish their strategic objectives. We look forward to maintaining our relationship with the Company.

And Leonard Riggio, chairman of Barnes & Noble, said:

Liberty’s decision to retain a portion of its investment and have active involvement on our board underscores Liberty’s ongoing commitment to Barnes & Noble.

But investors do not seem convinced, as shares were down more than 12% in Thursday morning trading on heavy volume.

Liberty Media said it will divest most of its stake in the struggling bookseller via private sales of its holdings. It took a 17% stake in Barnes & Noble in 2011 for $204 million, but that stake will be reduced to 2%. Liberty also will lose the right to keep two representatives on the Barnes & Noble board, so Maffei will step down.

With the loss of a major supporter, Barnes & Noble is left to continue its losing fight against the likes of Amazon.com Inc. (NASDAQ: AMZN), without even its underperforming Nook to give investors something to cheer about. But it is not the only retailer struggling. Best Buy is back in deep trouble, in part due to being overshadowed by Amazon as well. And UBS analysts suggest there are only five retail stocks worth buying now.

Barnes & Noble shares were down more than 12% in late morning trading to $19.39, in a 52-week range of $12.59 to $23.71. Liberty Media shares were down fractionally to $132.78 Thursday morning.

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