Wattles Bullish on Blockbuster16 Mar, 2009 By: Erik Gruenwedel
Fiscally challenged Blockbuster Inc. March 16 got a boost from investor Mark Wattles, co-founder and former CEO of rival Hollywood Video.
Wattles, whose investment company, Wattles Capital Management LLC, owns a 5.7% stake of the Dallas-based No. 1 DVD rental company’s 191 million outstanding shares, said Blockbuster would not file for bankruptcy protection any time soon, according to a regulatory filing.
Wattles, who sold Hollywood Video to Movie Gallery for $1.1 billion in 2005, reiterated what Blockbuster officials and analysts believe is the rental company’s ability to self-finance at least through the end of the year should it fail to find another credit revolver.
Blockbuster’s $200 million credit revolver comes due in August. The company has struggled overcoming more than $1 billion in debt obligations it was saddled with following the 2004 spin-off from Viacom Inc.
Wattles, in the filing, said Blockbuster has done a good job reducing overhead costs and shuttering unprofitable stores. It has reduced its debt to about $600 million.
The executive, who was equally bullish on now-shuttered Circuit City, said Blockbuster has done a good job repurposing itself as a retail-centric operation equally versed in digital distribution, including streaming, downloads and portability.
Wattles’ support sent Blockbuster shares up more than 18% in midday trading to 77 cents, which still represents a 48% decline since January.
Edward Woo, retail analyst with Wedbush Morgan Securities in Los Angeles, said of the few people who might be able to predict entertainment retail in the current economy, Wattles qualifies for the short list.
"He is putting money behind his talk and he has more experience in this industry (video rental), so I'm thinking this will be more successful than the Circuit City investment." Woo said.
"It's always smart to say positive things about companies you invest in," echoed fellow Wedbush analyst Michael Pachter.
Blockbuster, which already leaked news about positive same-store sales, reports fourth-quarter results March 16.