The same board that has been paying dividends despite falling revenues has come up with a plan to do – well, I’m not sure what.
At first glance it looks like the board is trying to prevent a takeover by corporate raiders, but I’m not sure that makes any sense.
The Company further notes that it has observed rapid material accumulations of its stock by a party or parties that cannot be identified. In light of the impending strategic alternatives process and such share accumulations, the Board also announced the adoption of a short-term Shareholder Rights Plan. The adoption of the Rights Plan is intended to maximize the likelihood of a successful outcome for the strategic alternatives process.
Under the terms of the Rights Plan, the rights will expire on October 2, 2019. In the absence of further action by the Board and subject to certain exceptions, the rights will be exercisable if a person or group, without Board approval, acquires 20% or more of Barnes & Noble’s Common Stock or announces a tender offer which results in the ownership of 20% or more of Barnes & Noble’s Common Stock. If the rights become exercisable, all rights holders (other than the person triggering the rights and related parties) will be entitled to acquire preferred shares equivalent to Barnes & Noble’s Common Stock at a 50% discount.
The rights will trade with Barnes & Noble’s Common Stock, unless and until they are separated upon the occurrence of certain future events. Barnes & Noble’s Board may terminate the Rights Plan or redeem the rights prior to the time the rights are triggered. Further details of the Rights Plan will be contained in a Form 8-K to be filed with the Securities and Exchange Commission.
At first glance this looks like the board is maneuvering to protect their cushy jobs by diluting a corporate raider’s stake in the company (they’re getting paid to run the company into the ground, and they don’t want a raider to sell B&N for parts).
Another possibility is that they plan to use this to boost the number of shares they own (it is the same board that authorized dividends during quarters with declining revenues, after all).
All we know at this point is that all the drivel in the media about B&N considering selling itself, or that it has an offer, or other nonsense like that – that is just a smokescreen created by the board as a cover for what is really going on.
If you know the real story, I would love to hear it.
P.S. And if you think the real story is that B&N has serious offers to buy the company then I have a bridge I want to sell you.