Blockbuster rallies on hope for debt plan
Shares climb after the company says it will postpone its annual meeting to address debt.
By Jeanine Poggi, TheStreet
Blockbuster (BBI) shares are rising, even as the rest of the retail sector limps along.
Shares of Blockbuster are gaining 40% to 57 cents today, following a 33% surge last week.
The company said on Friday it’s postponing its annual shareholders meeting until June 26 to give executives more time to devise a plan to restructure its debt and avoid being delisted. Management also said that it will ask shareholders to vote on a reverse stock split during the annual meeting.
Blockbuster said the month extension will help it "complete one or more of our ongoing recapitalization initiatives prior to the annual meeting, possibly resolving our NYSE noncompliance." Earlier in the month, the company said it didn’t meet the New York Stock Exchange’s minimum market value requirement.
Blockbuster has about $1 billion in debt. The company has said it might have to file for bankruptcy if it doesn’t raise cash.
Bloomberg reported on Friday that NCR (NCR) is planning to sell DVDs from its Blockbuster-branded video-rental kiosks, which are located in other retail outlets.
NCR is in talks with film studios to offer $2-a-day rentals on new releases through the dispensers, Bloomberg reported. NCR currently offers new releases for $1 through the kiosks.
NCR plans to install kiosks in 10,000 locations this year, adding new products to the machines, such as music. As kiosks expand, Blockbusters' brick-and-mortar footprint is steadily declining. The retailer is shuttering 1,000 stores. At a Blockbuster store that’s going out of business in New York, DVDs were selling for as little as 99 cents.
Digital Entertainment Group, a trade firm, said last week that sales of home entertainment products, like DVDs, Blu-ray discs and digitally distributed content, dropped 8% to $4.8 billion in the first quarter. Total rental sales plunged 14%.
There has been speculation that Blockbuster could be acquired, though there’s not much to support that rumor.
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John Stumpf acknowledges that growth has been slow, but he says he's still optimistic.
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