Guru investor David Abrams (Trades, Portfolio) is scaling back an ownership interest in the college booksellers unit of Barnes & Noble Inc. (BKS, Financial) that went public almost three years ago.
Abrams sold off a significant number of shares in order to reduce his ownership stake in Barnes & Noble Education Inc. (BNED, Financial) to 13%. Over the last several months, he sold off millions of shares.
Abrams portfolio is worth $3 billion and holds a total of 20 positions. Since the selloff, he holds about 6 million shares of Barnes & Noble Education, which are valued at almost $48 million. Since the second quarter of 2015, the investment has produced an estimated loss of 48%, according to GuruFocus.
The New Jersey-based Barnes & Noble Education appears to be on the opposite side of a major shift in the way college students buy textbooks. The company operates more than 700 on-campus bookstores at colleges and universities across the U.S. But a growing number of college students are looking to rent textbooks and other products online or check out in local public libraries and book-sharing communities, as a way to save on college.
The campus bookseller has seen a dramatic drop in its market cap in the last two years. The market cap for Barnes & Noble Education has tumbled to $314 million from $437 million in the spring of 2016.
The company’s stock, meanwhile, has been in struggle-mode for months. In the last year, shares slid 29% to $6.44 a share. Year to date, the stock price is down 21%. In Tuesday trading, shares were up 1.21% to $6.70 a share.
In the third quarter of 2018, it reported a net loss of $283.2 million, or a loss of $6.04 per share, compared to a gain in net income of $3.8 million, or 8 cents per share, in the prior-year period.
For the 39-week period ending Jan. 27, the net loss was $269.6 million, or a loss of $5.77 per share. That compares to a gain in net income of $5 million, or 11 cents per share, in the prior year. Many of the losses can be attributable to fewer textbook sales.
The company saw sales surge to $1.69 billion in 2018, compared to $1.372 billion the prior year. However, key metrics are in need of improvement. Its operating margin has seen an average decline of 37% per year. Also, EBIDTA per share stands at $1.43, down from $2.18 in April 2015.
The company has been expanding its employee base to over 20,000 to fill campus bookstores. The company had a total of 5,300 employees when it went public.
Buying shares
Joel Greenblatt (Trades, Portfolio) decided to purchase 15,000 shares of the bookseller after selling out in the third quarter. Abrams, who was mentored by guru Seth Klarman (Trades, Portfolio), began buying shares of the bookseller in 2015. His Boston-based asset management company scooped up 3.2 million shares for an average price of $13.51 a share just as the college bookseller went public. At peak in late 2015, Abrams owned nearly 9 million shares of Barnes & Noble Education.
Now, two-and-a-half years later, the guru has spent several months in a consistent selfoff.
Abrams sold 2.2 million shares, or 25% of his holdings, in the final months of the year, for an average price of $6.62 a share in the final quarter of 2017.
In early January, he sold off another 300,000 shares. Early this month, he dumped another 124,101 shares. He now holds about 6 million shares, which are valued at almost $48 million.Â
Abrams also opened two positions in the final months of the year. He bought shares of Time Warner Inc. (TWX, Financial) and PG&E Corp. (PCG, Financial).
