There is little as confidence-destroying as the sale of masses of shares by company insiders. Barnes & Noble, Inc. (NYSE:BKS) shareholders suffered just that fate earlier today after it was revealed that the company’s founder and chairman Leonard Riggio sold another tranche of shares in the bookseller. The value of the firm collapsed in the wake of the revelation.
According to Reuters, Riggio, who is the largest shareholder in Barnes & Noble, Inc. (NYSE:BKS), cut his stake in the company to 20%. The chairman of the board sold around $64 million worth of the company’s stock, in a move mirroring his sale of a block of the company last December. The founder appears to have little confidence in the prospects of the firm, and that lack of confidence is informing the decisions made by investors today.
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Insider selling dirge at bookseller
Insider selling is generally regarded as a sign that those with intimate knowledge of the functioning and performance of a company think that the market has valued it more highly than it is actually worth. In a declining business like bookselling, a move like that inspires fear in investors. They demonstrated that fear today, driving the company’s stock down 11% in the process.
Riggio’s stake in Barnes & Noble, Inc. (NYSE:BKS) stood at close to 30% before last December when he chose to divest himself of around 2 million shares in the company. The sale he announced today involved around 3.7 million shares, and brought his stake closer to 20% of the company. Stock in Barnes & Noble, Inc. (NYSE:BKS) has actually made gains in 2014, and sat at its highest level in almost a year at the end of March.
Stock in Barnes & Noble, Inc. (NYSE:BKS) has been on an incredible run in a poor market in 2014. The company’s stock was up more than 24% from January 1 through close on Wednesday afternoon. given the rise of the company’s value, it’s not all that much surprise that Riggio has sold stock, but that’s not reassuring investors.
Barnes & Noble struggles as books disappear
The unexpected rise of electronic reading along with the success of Amazon.com, Inc. (NASDAQ:AMZN) in selling books over the internet has driven Barnes & Noble, Inc. (NYSE:BKS) to a difficult realization. In the digital age a brick and mortar superstore may add nothing to the bookselling business. The company’s attempts to jump into e-reading have lagged behind Amazon while revenue in retail continues to weigh under risk.
The major changes in the way people buy books makes Barnes & Noble, Inc. (NYSE:BKS) a difficult company to bet on, and even the firm’s chairman is beginning to see the wall at the end of the tunnel. The company is now worth just little over $1 billion. That leaves it a value proposition for some investors, but the company’s own chairman isn’t among them.