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Barnes & Noble said Thursday it will sell up to 20 percent of barnesandnoble.com in an initial public offering, a move that would raise cash to help its money-losing online storefront to take on Amazon.com.
New York-based Barnes & Noble (BKS) said it will file its registration with the Securities and Exchange Commission within 30 days. The timing of the IPO would depend on the health of the stock market.
The IPO comes at a time when Amazon is thoroughly dominating the online bookselling business. While book sales through shops are still far bigger than online sales, investors are betting Amazon (AMZN) will one day surpass its real-world rivals. Amazon's market value was US$6.44 billion as of Thursday, more than Barnes & Noble and Borders Group combined.
But Barnes & Noble could swing the balance with an IPO, analysts said. An IPO also could raise lots of cash, with which the company could flood the Internet and traditional media with advertising. Barnesandnoble.com would still be closely tied to its parent, which has enormous clout in the publishing world.
"Barnes & Noble will do better [than Amazon] right from the word go," said Louis Ehrenkrantz, president of New York-based brokerage firm Ehrenkrantz King Nussbaum. "They are now going to show Amazon they can do better in profit margins. This is a way for Barnes & Noble to show the investment community that they can compete."
Barnes & Noble rolled the news of its IPO into its second-quarter earnings statement. It didn't specify any of its stock offering plans. But investors approved, sending the shares up $2.81 to $40.06. If Amazon's stock performance is any indication, barnesandnoble.com could get a very warm reception from Wall Street, analysts said.
"I'm not convinced in the long run that first-mover advantage will prove to be that much of an advantage" to Amazon, said William Armstrong, analyst at Fahnestock & Co. "[Amazon] has a lot of marketing deals with search engines. That's a valuable form of advertising, but media advertising is something that cannot be monopolized."
On its own, barnesandnoble.com would have a long way to go to catch up with Amazon. In the most recent quarter, the online bookseller had a net loss of $13.6 million, or 20 cents a share, on revenue of $12.5 million. In comparison, Amazon had a loss of $21.2 million, or 44 cents a share, on revenue of $116 million.
On Thursday, barnesandnoble.com claimed 720,000 customers, up 44 percent in three months. Amazon said in July it had 3.14 million customers, up 28 percent in three months.
Still, it's early in the race for all online booksellers.
"I'm actually pretty positive on barnesandnoble.com's prospects," said Ryan Jacob, portfolio manager at The Internet Fund. "I'm a realist. There is not one winner. I would be surprised if it didn't carve out a niche on the Net."
Barnesandnoble.com's IPO would be tied closely to the health of the stock market, analysts said. Although many Internet stocks have had impressive debuts in recent weeks, barnesandnoble.com's plans could be hampered by increasing uneasiness about the US economy.
"Two months ago, it certainly would have been" a good IPO, said Ken Fleming, analyst at Renaissance Capital. "But more recently there has been a lot more uncertainty, even among Net companies."
