Barnes & Noble Shares Jump on Nook Buyout Rumors

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Barnes & Noble shot up as much as 27% today after news broke that Microsoft may be planning on buying the bookstore-chain's Nook e-reader unit outright.

So what: Microsoft had purchased a 16.8% stake in the Nook last year for $300 million, valuing the unit at $1.7 billion and, last night, tech blog TechCrunch reported that Microsoft may put in a bid for the rest of the e-reader's digital assets at $1 billion, according to the company. Barnes & Noble also said that it plans to stop making the Android-based Nook tablet by the end of 2014, and rely instead on third-party partner devices.

Now what: If the deal goes through, the $1 billion would certainly be welcome for B&N, which had a market cap just north of that amount before today's surge, but selling the Nook would seemingly only hasten the bookseller's demise. Amazon.com has targeted brick-and-mortar booksellers above all other retailers, and has already consigned Borders to history's dustbin. Nook continues to operate at a loss, but it is still seen as carrying most of Barnes & Noble's market value. Meanwhile, analysts expect losses per share of more than $1.00 this year and next for Barnes & Noble as a whole. I'd say now's a great time to sell. This looks like an excellent example of "buy the rumor, sell the news." Stay on track of this developing story by adding Barnes & Noble to your Watchlist here.

The article Barnes & Noble Shares Jump on Nook Buyout Rumors originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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