Jan. 9 (Bloomberg) -- William Ackman’s Pershing Square Capital Management LP sold its entire stake in Barnes & Noble Inc. after the world’s largest bookseller lost more than half its market value.

Pershing Square said today in a U.S. securities filing it held no shares in New York-based Barnes & Noble as of Dec. 22. The hedge-fund company was the retailer’s third-biggest investor with an 11.8 percent stake as of Sept. 30.

The falling value of Barnes & Noble and rival bookseller Borders Group Inc. contributed to a 12 percent decline in Ackman’s largest hedge fund last year. Ron Burkle’s Yucaipa Cos. private- equity firm reported an 8.3 percent stake in Barnes & Noble Jan. 2 and said he may seek talks with the retailer.

Barnes & Noble spokeswoman Mary Ellen Keating declined to comment on the sale of the stake. Ackman didn’t immediately respond to a phone call and an e-mail seeking comment.

Burkle said in his regulatory filing last week he acquired the shares starting Nov. 24 because they “were undervalued by the market.” He intends to monitor Barnes & Noble’s performance and consider the option to discuss strategic opportunities with the company’s board or executives.

Sales Drop

Barnes & Noble said yesterday that sales at stores open at least a year fell 7.7 percent during the holiday period. It reiterated its full-year profit forecast.

The stock fell 31 cents to $19.02 at 4 p.m. in New York Stock Exchange composite trading, and dropped 56 percent last year.

Ackman, 42, also sold 6.2 million Sears Holdings Corp. shares last year. At Target Corp., he pressed the retailer to sell its credit-card loans and proposed spinning off the land under the company’s stores into a real-estate investment trust, a plan Target rejected. Ackman’s Pershing Square IV fund, which holds only Target securities, fell 68 percent last year.

Overall, Ackman outperformed peers that slumped about 20 percent on average in 2008, the worst year for hedge funds since Chicago-based Hedge Fund Research Inc. started tracking them in 1990. Pershing Square manages $4.78 billion.

To contact the reporter on this story: James Callan in New York at jcallan2@bloomberg.net.

Last Updated: January 9, 2009 18:14 EST