Blockbuster Shares Jump in September9 Sep, 2009 By: Erik Gruenwedel
Shares of Blockbuster Inc. Sept. 9 closed down nearly 7% at $1.21 per share, which nonetheless represented a 33% increase since Sept. 1.
The Dallas-based No. 1 DVD rental service has seen a surge in trading (nearly 9 million shares per day) since it sold an Irish-based retail unit and scaled back the value of letters of credit for former parent Viacom Inc. to $25 million from $75 million.
Viacom, which spun off Blockbuster in 2004 and saddled it with nearly $750 million in debt, had maintained the letters of credit to protect itself against possible liability regarding Blockbuster store leases dating back to 1999. Blockbuster, in reducing the credit amount, said the majority of leases in question had been renewed, renegotiated or eliminated. The company spends about $400 million annually on lease agreements.
“The shares keep going up because Blockbuster has been getting good news on the cash liquidity front as opposed to its [rental] business improving,” said Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles, which covers the stock. “For sustained stock movement up, however, the business, which includes rollout of Blockbuster Express kiosks and physical same-store sales, will have to stabilize and improve.”