Following yesterday’s after-marker news that the board of Barnes & Noble will explore “strategic alternatives,” the company’s shares are experiencing the anticipated heavy trading volume this morning, with volume of nearly 3 million shares in the first hour alone. At that point, the stock was up approximately 20 percent over yesterday’s close.
After the board boosted the stock’s prospects, Goldman Sachs thoughtfully upgraded their rating from sell to neutral, and changed their 12-month price target from $12 a share to $15 a share. Analyst Matt Fassler still hates the company and they “do not see compelling value in the business,” but since the market may prove them completely wrong, they postulate a 30 percent probability of a leveraged-buyout going through at $21.50 a share, or $1.388 billion.
Credit Suisse says “it’s difficult to envision a buyer of this company given the structural issues it continues to face. We view the announcement as possibly an attempt to quell some of the corporate governance concerns raised by Ron Burkle and perhaps a way to explore if any outside interest actually exists. Unfortunately the purchase of the College Book stores took away the
low EV/EBITDA multiple and the excess cash flow.” CS sticks with their rating of underperform.
Analysts missed the earnings shortfall in June, which prompted the big drop in share price, and missed anticipating the board’s announcement as well, which can’t make them happy. Indeed, “people familiar with the matter” confirm to the WSJ that the steep drop in share price since the company’s warning on lower profits (after a consistent slide for much of the year) “caused the board to decide over the last month that it should explore a possible sale of the company, which is now in the early stages.”
There is a lot of strange speculation and thin reasoning out there today on what all of this means, the same WSJ article contains one of the best-reasoned observations from Kobo ceo Michael Serbinis: “Going head to head with Amazon and trying to become a different company with the same investor base is tough. Going private would enable them to transfer the business without the pressue of quarterly earnings. It’s hard to make the transition that they are trying to make under the constant eye of the market,” which is focused on earnings and growth, quarter by quarter.