Bankruptcy for Blockbuster?
Posted
Mar 03 2009, 02:16 PM
by
Kim Peterson
Rating:
Nothing like a bankruptcy rumor to demolish a share price. Blockbuster (BBI) has hired lawyers to look into a possible bankruptcy filing, Bloomberg reports. Shares plunged 77% Tuesday to 22 cents before trading was halted.
Late Tuesday, Blockbuster said it was exploring a corporate restructuring, and not a bankruptcy.
The movie-rental chain has been hit hard by Netflix (NFLX), which has been firing on all cylinders for years while Blockbuster struggled to find a strategy for the future. On some days, it went after Netflix with guns blazing, but other times it pursued other ideas, such as its bizarre attempt to buy Circuit City last year.
Blockbuster has 7,500 stores worldwide, and hasn't wanted to cannibalize its retail sales with a by-mail DVD effort (It has a by-mail offering, but has wavered on how heavily to promote it). But the video-rental industry is hurting, despite Blockbuster's many attempts to try to lure people back to stores with in-store kiosks and other offerings.
Netflix investors were reaping the Blockbuster bounty Tuesday, as shares rose nearly 12% on the news to $38.30. Shares were up slightly Wednesday as well.
One option being reported for Blockbuster is a "pre-packaged" bankruptcy that is largely handled out of court. It normally includes agreements with creditors about the future of the company, Bloomberg reports.
Late Tuesday, Blockbuster confirmed it had hired a law firm, but wants to do a corporate restructuring. There are no plans to seek bankruptcy protection, a spokeswoman told the Associated Press. Investors were comforted by the denial, and Wednesday Blockbuster shares have doubled to 44 cents.
Bankruptcy or not, the company doesn't have to confirm one fact: Time and again, it has mismanaged its future, losing focus and missing opportunities while a little-known competitor stole the show.
Related reading:
Blockbuster's bizarre play for Circuit City
Blockbuster tries in-store movie kiosks
Blockbuster price hike will send customers packing
Blockbuster hates the Internet
