In September, the Securities and Exchange Commission said that a takeover bid in February this year for Barnes and Noble (BKS) which saw the bookseller’s stock rise more than ten percent was fraudulent due to the fact that the firm behind the takeover announcement were lacking in the necessary funding to carry out the deal.
Michael Glickstein and his New-York based company G Asset Management LLC also allegedly reaped over $160,000 in improper profits from the higher share price which was prompted by a news release announcing the deal, according to the SEC.
Whilst Glickstein and his company neither admitted nor denied the allegations against them, an agreement was made to return the $175,000 of alleged ill-gotten interest and gains. The firm have also agreed to be subject to SEC censoring and Glickstein has agreed to pay a $100,000 penalty and has been issued with a five year ban from participating in the securities industry.
The enforcement action focused mainly on the $22 per share offer which G Asset Management announced in February as a purported effort to purchase 50% of Barnes and Noble’s stock. According to a SEC order, the offer represented an approximate 30% premium over the value of the bookseller’s shares at the time.
Lack of Funding
Suggesting an alternative, G Asset Management made an offer to acquire 50% of Barnes and Noble’s Nook e-reader business unit.
However, with no more than $3 million in assets under management, the investment firm had no ability to finance either of its purchase offers, neither did it have any reasonable basis to suggest that it would be able to finance any of the offers in the future, should Barnes and Noble have accepted.
Increase in Stock Price Halts New York Stock Exchange
According to the SEC, Glickstein and his company also failed to disclose information regarding their acquisition of approximately 14,000 shares of Barnes and Noble stock, along with roughly 30,000 call options which would have risen in value if the bookseller’s shares were to rise.
Just seconds after the G Asset Management news release was issued, Barnes and Noble stock value jumped from just $17.05 to $18.99. As a result of the more than 10% increase in value, the New York Stock Exchange immediately halted trading. Following a number of reports by media outlets which stated that traders had questioned the ability of G Asset Management to fund a takeover, the stock ultimately closed at a 5.4% increase for the day at $17.69.