Risk & Compliance

SEC Charges Firm Over Fraudulent Offer For Barnes & Noble

"Manipulative" press release led to a jump in Barnes & Noble shares and "ill-gotten" profits for Michael A. Glickstein and G Asset Management.
Katie Kuehner-HebertSeptember 24, 2015

The Securities and Exchange Commission on Thursday charged Michael A. Glickstein and his New York-based investment advisory firm with fraudulently stating that it had offered to purchase a majority stake in Barnes & Noble, driving up the booksellers’ shares so it could profit.

According to the SEC’s order instituting administrative proceedings, Glickstein and G Asset Management issued a press release on Feb. 21, 2014, announcing that G Asset had offered to purchase a majority interest in Barnes & Noble for $22 per share.  In a matter of seconds after the announcement, Barnes & Noble’s stock price rose from $17.05 per share to $18.99 per share, causing the New York Stock Exchange to temporarily halt trading in the stock.

The SEC’s order found that G Asset’s press release was misleading because it did not disclose material facts, including:

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  • G Asset had no ability to finance its purported offer to purchase Barnes & Noble and no reasonable basis to believe it could finance its offer in the future.
  • G Asset had recently purchased thousands of Barnes & Noble shares and short-term call options, intending to profit by selling the shares and options after issuing the press release.

The day before the press release was issued, G Asset sent an email to Barnes & Noble, proposing to acquire 51% of the company at $22 per share or, in the alternative, to acquire 51% of the company’s electronic reader (Nook) business unit at $5 per share. But the firm “had no ability to finance either of its purported purchase offers and no reasonable basis to believe it could finance the offers in the future even if Barnes & Noble accepted one of these offers,” the SEC’s order said.

“Specifically, as the manager of funds … with less than $3 million in total assets under management, the respondents had no ability to acquire 51% of Barnes & Noble at $22 per share because that would require the respondents to raise approximately $670 million to finance the purchase,” according to the order. To purchase a majority of the Nook business at $5 per share, G Asset would have had to raise about $152 million, the SEC said.

The SEC’s order found that G Asset’s investment funds made approximately $168,000 in profits as a result of their sale of Barnes & Noble stock and options on the days surrounding the press release.

Without admitting or denying the findings in the order, Glickstein and his firm agreed to return $175,000 of allegedly “ill-gotten gains” and interest, the agency said. G Asset also agreed to be censured and Glickstein agreed to pay a civil penalty of $100,000 and be barred from the securities industry for a minimum of five years.