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.
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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.
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.
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.
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