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Why Barnes & Noble Stock Skyrocketed 23% Today

Steve Symington, The Motley Fool

What happened

Shares of Barnes & Noble (NYSE: BKS) were up 22.7% as of 2:45 p.m. EDT Thursday after The Wall Street Journal reported the bookseller is close to a deal to be acquired in a go-private transaction by hedge fund Elliott Management. 

Citing "people familiar with the matter," the Journal says Elliott is the "lead bidder in an auction that could come to a head soon" -- though it also cautioned the terms were unclear and a deal is not guaranteed. For perspective, following this afternoon's pop, Barnes & Noble has a market capitalization of roughly $420 million.

Woman drawing large yellow fish eating smaller fish, acquisitions concept.

Image source: Getty Image.

So what

The deal would conclude a formal review of strategic alternatives launched by Barnes & Noble last October, when it noted "multiple" potential acquirers had expressed interest, including company chairman Leonard Riggio.

Still, shares were down around 25% so far in 2019 as of this morning, most recently hurt in March as Barnes & Noble reported flat holiday-quarter revenue and reduced its full-year earnings outlook -- and this despite achieving a 1.1% increase in comparable-store sales, which management said represented their "best quarterly performance in several years."

Now what

I'd be remiss if I didn't reiterate that investors would do best to focus first on the underlying health of Barnes & Noble's business. Again, there are no guarantees that the aforementioned auction will yield a palatable deal for shareholders, which is why Barnes & Noble stock still trades modestly below where it stood shortly after announcing its strategic review late last year.

But given renewed hope for a juicy acquisition premium, it's also no surprise to see Barnes & Noble up big today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.