Backdating & bonds vex bookstore chains

Last year was a tough one for booksellers that ended on low note, which prompted the president of Books-A-Million to bemoan the period as "a tough fourth quarter for bookselling." And unfortunately it sounds like 2007 is off to a rocky start for the nation's two largest chains -- although for different reasons.

In an SEC filing, Barnes & Noble admitted it had improperly backdated stock options, a mistake it blamed on a "widespread misconception" held by senior management and faulty advice provided by its outside lawyer. There's no word if this will become a criminal investigation, but the WSJ article notes that there have been 10 recent criminal prosecutions for stock option manipulation. The B&N executives and directors who benefited from the backdating have agreed to forfeit any gains.

Borders is also having a tough time right now. Last year the retailer brought on a new CEO as part of a turnaround effort, but today management scuttled the sale of $250 million in convertible bonds "based on shareholder feedback." This article from the WSJ also has an interesting rumor -- some investors are pushing for the company to merge with B&N.