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Barnes & Noble, Inc. Message Board

  • azn_iixii azn_iixii Aug 15, 2011 1:46 PM Flag

    I'm going short...

    1)This stock is most certainly reporting a very dismal earnings this month...Read any of the customer reviews on the nook color and tell me their "tablet" business is doing well. I particularly enjoy reading the customer comments on the egadet review.

    They suspended the dividend to push the nook and this product is definitely not making customers smile. Additionally, ask RIMM how easy it is to fight off APPL. Trying to seduce programmers to create apps for a tablet that customers arent happy with is not going to happen(Playbook)?
    2)The downside to a short bet is capped at the $17 offer that is currently facing great macro headwinds. I have no idea if the original offer was retracted, but the idea of a bidding war seems unlikely.

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    • Netflix only has 2.66B in revenue, and 600m in cash flow.

      Blockbuster was a 6 billion dollar company.

      In other words- if Blockbuster had conceived, created and executed a company identical to Netflix as an internal project from day one, and never had any competitor at all- they still would have gone bankrupt just because the market for DVD rentals shrank so much.

      That's certainly not the case with Barnes and Noble and Amazon.

      Ah... right back to where we were six months ago, Tracy.

    • This is ridiculous. Even when looking at Amazon's possibly biased website reviews, Color Nooks reviews have roughly the same 4-star average as Amazon's kindle. Unbiased Consumer Reports gives the Nook Color high ratings--the best color book reader on the market.

      Next quarter, Borders will be out of the way as far as physical bookstore results. BKS could easily be taken out at $20 per share. Malone, Riggio, or Burkle will buy the company. $17 is the minimum bid. $18-$20 is more likely the final price, especially with the knowledge that the boost from Borders' shutdown this fall will lift the revenue of the BKS bookstores significantly.

      The $17 offer for BKS came before the Borders liquidation news. (There was still a possibility that someone would buy Borders in bankruptcy and keep most of the stores alive, which clearly would have been detrimental to BKS.) Borders' former retail spaces are in the process of being leased up and occupied by non-bookstore retailers now. The liquidation of Borders increases the value of BKS. If anything, the demise of Borders will boost traffic to BKS as physical bookstore customers start to realize that they need to support BKS or they'll be stuck with a going to tiny limited selection boutique bookstores.

      Therefore, it's likely that a buyout bid will be at least 5-10% higher than Malone's $17 offer. $17 is the floor. Malone is not a flake. Burkle doesn't want to lose money on his investment. Riggio is too proud to sellout at a lowball offer.

      • 2 Replies to meluvyoushorttime
      • From the point of view that BKS will at most receive a 5-10% higher bid than $17...I am comfortable with my risk in that scenario. However, I have to agree with popnfresh in that a short squeeze would shoot the BKS above that price.

        My view is that BKS has 2 very big and scary competitors AAPL and AMZN. APPL tends to destroy the competition. The IPAD is no doubt more expensive than the nook. But for the nook to stand any chance of success it needs to have good and plentiful apps, which is hard to do when all of the programmers are APPL drones.

        Ignoring the fact that Amazon also produces a direct competing product...This is a company that is also famous for destroying the competition. As far as the survival of the brick and mortar bookstore.It looks like Amazon is to BKS as Netflix was to Blockbuster.

        Good luck to the both of you...I like and respect both of your assessments. It'd be nice if we could all make money money on this.Maybe a crazy fall after earnings,only to be followed by a frenzied bidding war.

    • Your downside is NOT capped at $17, far from it.

      Even putting aside the possibility of a actual bidding war- this stock traded for $20/ share even after the buyout was announced. Why? Because there was a short squeeze.

      With 32% of the shares short, that could easily happen again. It most likely WILL happen again if they announce the deal is closing- at any price.

      And as I've pointed out before- they will most likely NOT make a public announcement that "the deal is off". Even if it is. Why would they do that? So there is little chance of the stock plunging for that reason.

      What you would more likely see is simply a subtle drifting down in price until Riggio buys the company himself at, say $14/share. Or they announce a spinoff, or they have some positive news to announce about the fundamentals of the company, or they have some alternative financing lined up.

      Your best hope as a short is that Riggio or Malone floats more nasty rumors to push down the price and get the deal through. But I don't think they need to do that at these price levels.

      If they do- take that as your last chance to cover.

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