Trading Board Halts Blockbuster Shares1 Jul, 2010 By: Erik Gruenwedel
Blockbuster Inc. late July 1 said it expects its shares to be delisted by the New York Stock Exchange (NYSE) after it failed to acquire shareholder approval for a reverse stock split.
Dallas-based Blockbuster also said it reached an agreement with a majority of bondholders to delay payment of a $42.4 million interest payment due today.
Without the delay and ongoing recapitalization efforts to significantly reduce more than $900 million in debt, Blockbuster has hinted it could face bankruptcy.
“We appreciate the ongoing support of our senior secured noteholders and other parties involved in our ongoing exploration of recapitalization opportunities,” said CEO Jim Keyes in a statement. “We continue to manage the business towards maximizing cash and liquidity and monitoring cost reduction opportunities and operational efficiencies.”
Separately, the Blockbuster board agreed to extend Keyes’ employment contract, which was set to expire this month.
Earlier in the day, the NYSE stopped trading shares of Blockbuster stock after it was disclosed that the company’s shareholders had not approved a measure required to comply with regulatory filing requirements.
Trading of Blockbuster shares — down 1 cent at 23 cents per share — was stopped at 10:42 a.m. EST.
At issue is shareholder voting at last week’s annual meeting regarding a reverse stock split that would enable shares to be regrouped above $1 — a requirement of the NYSE.
Blockbuster had initially said voting results confirmed passage of measures to combine Class A and Class B and authorize a reverse stock split. But in a filing Blockbuster said that despite receiving overwhelming approval of votes cast, due to a low vote turnout, the proposals did not receive the required affirmative vote of the majority of outstanding Class A and Class B shares voting as a single class.
Of the approximately 289.9 million total votes outstanding, the conversion proposal received about 141.2 million votes in favor (or approximately 48.7%) and the reverse stock split proposal received approximately 126.1 million votes in favor (about 43.4%).
Indeed, last week’s shareholder meeting was delayed 45 minutes until a quorum of voters or their representatives could be established.
“Obviously with the stock being halted for most of the day, the NYSE wasn’t happy with the answers they were getting from Blockbuster,” said Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles. “Since this is also the day that they are expected to pay $42.4 million, there might be something else brewing that's bigger than just the votes.”