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Did B&N Cook the Nook’s Books?

There’s abarnes noble logo juicy story going around today about a brief mention in Barnes & Noble’s latest SEC filing. No one really knows what it means (or if it has any importance at all) but that’s not stopping everyone from writing about it.

According to Forbes, the SEC is investigating an allegation as well as the company’s recent financial disclosures:

In Barnes & Noble’s quarterly report filed Thursday, the company noted that the SEC “notified the Company that it had commenced an investigation into: (1) the Company’s restatement of earnings announced on July 29, 2013, and (2) a separate matter related to a former non-executive employee’s allegation that the Company improperly allocated certain Information Technology expenses between its NOOK and Retail segments for purposes of segment reporting.” The company announced that it is cooperating with the SEC on this matter.

Barnes, & Noble, of course, had nothing to say. "We are cooperating with the SEC, including responding to questions and requests for documents," company spokeswoman Mary Ellen Keating said in an email. "We cannot comment on why the SEC is investigating the restatement," she added.

B&N has experienced a severe setback in their digital ambitions over the past year, with revenues of the perennially unprofitable Nook Media division continuing to drop over that time.  This probably led to B&N having to write off expenses in ways that may or may not have been quite kosher.


I don’t know about you but I’m going to wait until there’s a report before drawing any conclusions. For all we know this investigation could result in a conclusion about as interesting as a spreadsheet on the retail price of tea in southern Ohio in 1964.

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fjtorres December 6, 2013 um 8:54 pm

Such a curious allegation.
Makes you wonder in what direction were they shifting costs?
And why?
Even after the alleged shift neither side of the business looked all that healthy anyway… 😉

Alexander Inglis December 7, 2013 um 8:09 am

There is a bit more information than you are suggesting. The case concerns restatement of revenue and losses which created a discrepancy of $4M — $64M loss vs $68M loss. On an annual revenue of abt $7B, it’s not a material error. Sure, investigate and explain it for the sake of transparency — but this looks like a procedural matter more than wrong doing.

Investors didn’t like the news: the stock was down 12% from the previous close. I am willing to bet B&N will report a soft holiday season and that;s going to be the real news in 2014 that will drive the next steps in this sorry drawn out saga.

fjtorres December 7, 2013 um 6:19 pm

Really going out on a limb, there are you? 😉

I’ve been wondering lately about the terms of the MS deal: how long does it have to run and any escape clauses. Cause MS may have to start figuring out what to do if B&N hits Chapter 11 and inquiring minds want to know…
Are they creditors or debtors? Both?
It’s all sofa cushion money to them, of course.

flyingtoastr December 7, 2013 um 10:17 pm

Except for how BN is, financially, still in pretty decent shape for the battering their sales took last year.

The chances of BN hitting bankruptcy any time soon are still low. Quit the FUD.

Marie December 7, 2013 um 9:16 am

Well, I am now *desperate* to know the retail price of tea in southern Ohio in 1964. 😉

David Gaughran December 9, 2013 um 6:36 am

I don’t know if this means anything, but it looks like at least one law firm is on the scent:–NOBLE-INC-11858/news/Barnes–Noble-Inc–SHAREHOLDER-ALERT-Pomerantz-Law-Firm-Investigates-Claims-On-Behalf-of-Invest-17585333/

Nate Hoffelder December 9, 2013 um 11:36 am

I’m not sure what it means either.

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[…] SEC investigation was revealed last week, but has yet to actually uncover any wrongdoing. But now that the SEC is going to be assisted by […]

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