Barnes & Noble: The Titanic Goes On Sale

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Barnes & Noble (NYSE: BKS), a slightly younger brother to Blockbuster in the retail industry, has gone up for sale. The book store firm’s stock moved up 30% after hours to $16.10, more evidence that indeed there is a sucker born every minute. There is some proof that Wall St. has not lost its head altogether. Barnes & Noble’s 52-week high is $28.78. The stock traded at $45 less than five years ago.

The company will explore “strategic options” which means that the value of Barnes & Noble’s priced peaked some time ago along with its prospects. The board of directors understands Barnes & Noble cannot properly be a public company. It needs to be private which would allow fools who believe in the retail book business to run the firm without damaging shareholders.

The board stated that

“As the world’s largest bookseller, Barnes & Noble has an iconic brand and unique competitive advantages we believe will position the company to succeed over time in a rapidly changing market. The Board is confident in Barnes & Noble’s strategy and fully supportive of the senior management team, which is delivering explosive growth in our fast-developing digital business. The Board has concluded that a review of strategic alternatives is the appropriate next step to take full advantage of our compelling digital opportunities and to create value for shareholders, customers, and employees.”

Iconic brands often lose their value. The board did not own up to the fact that Barnes & Noble’s best days are behind it. E-readers, tablet PCs, and e-books have permanently undermined the value of the company’s 750 bookstores and 637 college outlets. And Barnes & Noble’s net income is moving in the direction of zero. In an investment banker’s world, the value of the company based on its future prospects may be zero.

Leonard Riggio, the founder of Barnes & Noble and chairman, may make a bid. He is fabulously wealthy and will almost certainly borrow enough money so that a transaction will be leveraged and his risk will be modest.

It has been written too often that it is hardly worth repeating. The retail book industry is dying and is another of a long list of businesses savaged by the internet and the age of digitization. It is an age which already has its winners in (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), and Google Inc. (NASDAQ: GOOG). Books run on tiny chips on small screens, and at least fewer trees are cut down.

Douglas A. McIntyre