Barnes & Noble (BKS - Free Report) stock received a jolt on Tuesday morning after reports surfaced that an activist investor is pushing the struggling bookstore giant to sell.
The Wall Street Journal first reported on Monday night that Sandell Asset Management Corp. began purchasing more stake in Barnes & Noble, despite already being among the chains 10 largest investors, in order to push for a sale.
After jumping in pre-market trading, shares of Barnes & Noble were up 10.92% in morning trading on Tuesday. Yet, even at its intraday high of $8.00 per share, the struggling bookstore chain rests nearly $5 below its 52-week high.
However, in a time when Amazon (AMZN - Free Report) dominates far more than the book market it began to take over years ago, the activist investor group Sandell believes Barnes & Noble is still valuable. According to a Sandell letter, the firm projects that the bookstore company could possibly draw a $12 per share bid.
The company thinks Barnes & Noble has the potential to stay around even as brick-and-mortar companies continue to vanish. "It is our contention that physical books, and physical bookstores, are not going away anytime soon,” Sandell said in a letter to the Barnes & Noble board.
“What makes the under-valuation of Barnes & Noble all the more shocking is that, as opposed to the numerous other national apparel, footwear, grocery, and home furnishing chains abounding in this country, there is but one truly national bookstore chain.”
Talks of a possible Barnes & Noble sale began years back and ramped up in 2011 when Borders, its rival national bookstore chain, liquidated and closed completely. But a sale never came, and since July 2015, the company’s stock has plummeted from $17 per share.
Sandell’s note also referred to the retail book giant as “beachfront property that may hold significant strategic value to internet or media companies seeking a retail presence.”
The letter quoted Thomas Jefferson, Kurt Vonnegut, and others about the importance of books. But investors are more likely to care more about the fact that Sandell believes Barnes & Noble's is undervalued today, and that they are pushing the board of directors to strongly consider selling the company.
The firm’s claims correspond with Zacks’ current outlook on the bookstore chain. Barnes & Noble is a Zacks Rank #2 (Buy) and scored an “A” for both Value and Growth, as well as a “B” for Momentum, in our Style Scores system.
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