Blockbuster Rejects Shareholders’ Call for Revote

19 Jul, 2010 By: Erik Gruenwedel

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Blockbuster has denied a request by a group of shareholders seeking to hold an emergency meeting to reconsider two measures that led to the Dallas-based rental chain being removed from the New York Stock Exchange.

Earlier this month, shareholder Niko Celentano sent Blockbuster CEO Jim Keyes a letter representing about 170 shareholders (or 11% of common stock) asking to reconvene a special meeting to revote on measures that combined Class A and B shares and, more importantly, a reverse stock split that would have brought the stock above the $1 per share minimum value required by the NYSE.

Both measures were initially declared passed at the June 24 annual shareholders meeting but then reversed after company officials tabulated the actual vote count. Indeed, voters present at the meeting in Dallas had overwhelmingly (48% to 3%) voted in favor of the measures. Rules dictating at least 50% shareholder approval doomed the measures and Blockbuster subsequently was removed from the NYSE trading board.

Blockbuster shares now trade over-the-counter (OTC).

In a response, Rod McDonald, VP, secretary and general counsel, with Blockbuster, expressed support for the shareholders but reiterated his dissatisfaction the measures did not generate the required backing.

“We were surprised and disappointed that almost half of your fellow stockholders did not take the time to familiarize themselves with these important matters and vote at the meeting,” McDonald wrote.

Celentano, who has owned Blockbuster shares for nearly two years, has vowed a follow-up this week. The group, which has a website, www.blockbustershareholders.com, has since swelled to nearly 370 shareholders representing more than 55.7 million shares, or 19.25% of the company.

The investor said reaction to the group’s efforts has gotten “a little crazy,” with investors from around the world looking to join the group.

“I’ve gotten responses from countries I didn’t even know they invested in stocks,” he said.

Celentano said that when Blockbuster pushed back the annual shareholder meeting a month, it didn’t also extend the cutoff date for eligible voters, which he said resulted in new shareholders not being able to vote.

“The situation was just a mess,” he said. “It came to this because there was no line of communication between Blockbuster and myself. I never got a return phone call or return email from anybody. But then Blockbuster has always been ‘interesting’ in my experience with them.”

Shareholder Robert Boff July 19 sent a response on behalf of the group to McDonald, saying it was unfair to put failure of the measures’ passage only on shareholders.

“We still believe that not moving the record date was the most damaging event that caused the failure of our two proposals,” Boff wrote. “Surely, Blockbuster must take the responsibility for that. Let’s just say we all made mistakes during this important process.”

Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles, said that, regardless of how shareholders feel, Blockbuster has more pressing issues.

“Blockbuster is focused on getting its debt recapitalized and not concerned about getting its stock immediately re-listed on the NYSE,” Woo said. “It is a sign that equity concerns are not at the top of their priority list, but debt is.”

Blockbuster shares closed up 2 cents at 12 cents per share in moderate trading.

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