TLDR: BNED is considering pulling out of the Greenhaven deal, which would cancel the 17-for-1 stock issuance. This could drastically drive up the share price due to limited supply and high demand. With strong strategic moves and investor interest, BNED shows potential for significant gains. We estimate BNED may reach a conservative share price between $5 – $7 having striking similarities to GME and AMC being a household name and we believe a meme-like run is in store for the family friendly bookstore.
Barnes & Noble Education, Inc. (BNED) has been the focus of intense market activity, with its stock price experiencing significant volatility. Recent reports suggest that BNED is considering pulling out of its deal with Greenhaven Associates. If this happens, the anticipated 17-for-1 stock split will not take place, which could drastically drive up the share price. Here’s a detailed analysis of why this potential move could be a game-changer for BNED stock.
Company Overview
Barnes & Noble Education, Inc. (BNED), established in 1965, operates over 1,400 physical and virtual bookstores serving more than six million U.S. students. The company sells and rents textbooks and general merchandise while offering digital solutions to enhance educational affordability.
Key Metrics:
• Market Cap: $38 million
• Shares Outstanding: 53 million
• Revenue: $1.6 billion
• Institutional Holdings: Roughly 36%
• Insiders: 27%
• Free Float: Approximately 20 million
• Short Interest: Roughly 7% (via Fintel); Unofficially ~90% Short Interest of Free Float (To be reported on May 31)
The Short Interest Misconception
While the reported short interest is around 7%, several strategies can mask the true extent of short selling. These include put options, inversely correlated ETFs, synthetic short positions, total return swaps, and offshore transactions. These methods enable investors to short a stock without it being reflected in the official short interest data, potentially underestimating the actual short positions.
Recent Performance and Market Dynamics
Despite facing a challenging 2023, BNED remains a revenue-generating company with assets exceeding its liabilities. Activist investors have shown serious interest, with Greenhaven Associates acquiring a 9.9% stake and offering a cash injection. BNED traded at 18 cents per share recently, with a market cap of $12 million, which seems undervalued given its financial performance and strategic interest.
The Greenhaven Associates Deal
The deal with Greenhaven Associates includes a proposed 17-for-1 stock split as part of a cash injection plan. This split would significantly increase the number of shares outstanding, diluting the float and impacting the stock’s supply-demand dynamics. However, if BNED pulls out of this deal, the stock split will not occur, and the current limited supply of shares could drive the price higher.
Impact of Withdrawing from the Deal
1. Supply and Demand Dynamics:
• Without the 17-for-1 stock split, the current share supply remains constrained.
• High demand with limited supply typically results in upward pressure on the stock price.
2. Short Squeeze Potential:
• Short sellers would face increased difficulty in covering their positions due to the limited availability of shares.
• This scenario could lead to a short squeeze, driving the stock price even higher as shorts scramble to cover.
3. Institutional and Retail Interest:
• The existing institutional interest, coupled with renewed retail investor momentum, could further boost the stock price.
• The strategic initiatives already in place to strengthen BNED’s financial position would continue to attract investor confidence.
Strategic and Financial Considerations
BNED has adopted strategic measures like a poison pill to prevent hostile takeovers and protect shareholder value. Additionally, a $95 million investment plan and the company’s focus on digital education solutions are expected to enhance profitability and market standing.
The Perfect Storm for BNED
The combination of potential withdrawal from the Greenhaven deal, strategic measures to combat short selling, and a favorable options chain setup creates a perfect storm for BNED. The stock appears undervalued given its revenue, assets, and strategic interest, making it a compelling buy.
Conclusion
Barnes & Noble Education, Inc. (BNED) stands at a critical juncture. The potential withdrawal from the Greenhaven Associates deal and the subsequent cancellation of the 17-for-1 stock split could significantly drive up the stock price. Coupled with the high short interest, strategic financial moves, and renewed investor interest, BNED is poised for substantial gains. Investors should keep a close watch on developments, as BNED could indeed be the next big meme stock to follow in the footsteps of GME and AMC.