Small Investor/Agitator Touts Unfinanced "Proposal" to Buy Control of Barnes & Noble Or Nook

Michael Glickstein's G Asset Management -- by all outward indications a one-man shop -- has been agitating the Barnes & Noble board to increase shareholder value since 2011 without much success, but on Friday he discovered the power of a press release and put himself on the map.

Put on the wire early Friday afternoon, G Asset Management's announcement touted their "proposal" to acquire a controlling stake in all of Barnes & Noble or, failing that, the "Nook segment," which does not exist currently as a freestanding piece. This is not an actual bid, or even a formal offer. G Asset appears to have no financing, and SEC records show various G Asset funds having raised only about $3 million over the years.

Traders and pile-on rebroadcasters produced a brief spike of $2 a share in Barnes & Noble's stock price Friday afternoon, up to $19 a share, but the price retreated from there the rest of day, closing at about $17.70 (and moving to about $18 a share in Monday morning trading). That's somewhat less than the completely erroneous TechCrunch story almost a year ago that had Microsoft ready to buy Nook Media LLC that took shares from their current level up to over $23 a share before people realized the flaws.

Now that people have a caught up a little, no analyst or major financial news organization expects much of the G Asset letter. Look at the release and you see it describes a non-binding "proposal" for 51% of the parent company, saying it values the company at $22 a share. Their alternate proposal, to acquire 51% of the Nook segment, values that portion of the business at $5 a share (or roughly $300 million).

The release makes it clear both proposals are subject to "among other conditions, the obtaining of the necessary financing." In other words, they have no financing. Look more closely, and you can infer that they don't expect to be able to raise the financing either. Rather, in aiming to buy control of Barnes & Noble, G Asset wants to use the company's own cash and borrowing capacity to finance the purchase. It's right there in the press release: G Asset wants "complete access to the company's current credit facility and the cash on the balance sheet."

The release also indicates that G Asset made a similar "proposal" last November, which was for $20 a share -- and went nowhere. The Nook portion of the offer is even more confusing, since G Asset says that its November proposal "suggested that the company should immediately separate the unprofitable Nook segment from the college and retail segment and recommended commencing a rights offering for the Nook segment to existing shareholders." Right now that Nook segment is owned by the Nook Media LLC subsidiary, which also owns BN College. Both Microsoft and Pearson own minority portions of Nook Media (and have warrants and other rights), so for now it's not clear that the Nook business in and of itself can be separated out from Nook Media anyway.

Barnes & Noble had no comment on the new communication, except to confirm that they are in receipt of it. Indeed G Asset has made a variety of proposals and suggestions to the board over the past couple of years. In March 2012, Glickstein made a similar nonspecific "offer" to buy Barnes & Noble College, for $460 million, which was shrugged at by investors and the company itself.

G Asset Management's only known SEC filing was in early 2012 and that, too, has been misinterpreted. It declared a small position of 41,000 shares of Barnes & Noble's stock -- less than $750,000 at today's price -- plus a big options position on 3 million shares that cost very little. It was only the options that led to the 5 percent SEC disclosure, not the shares.

In actual Barnes & Noble-related news, the company's Sterling Publishing is closing the Asheville, NC office of their Lark Books unit, the Asheville Citizen-Times reported. Spokesperson Mary Ellen Keating confirmed to them, "Sterling Publishing is consolidating the operations of its Lark Books craft imprint into the New York office, effective February 19. As part of the consolidation, Sterling will close the Lark office in Asheville." She added that, "Lark titles will be reassigned to the New York-based editorial, creative and marketing staff. Sterling will continue to publish and fully support the Lark program going forward." The website says that 15 editors are currently employed by Lark in Asheville and Keating said "under 20" jobs would be eliminated in Asheville.