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Misery Can Be Profitable

15 Sep, 2005 By: Erik Gruenwedel

I recently wrote about Blockbuster Inc.'s sagging financial situation, including downgraded junk status of its debt, and quoted a venture capitalist (VC) anonymously who believed Big Blue couldn't support the debt and was, in a sense, “dead stock walking.”

I got an e-mail in response from someone claiming to work for a Blockbuster franchise who took issue with my use of anonymous sources, but admitted the company had been sucked dry by former parent Viacom and had been poorly run as a publicly traded company.

Now, however, he said someone used to spending “his own money” was streamlining operations, and I could “take it from [him,] they are doing fine.”

I wasn't sure if that “someone” was CEO John Antioco or recently elected board member Carl Icahn, but regardless, my anonymous VC put his money where his quote was and sold short 10,000 shares of Blockbuster, earning almost $10,000.

The VC borrowed 10,000 shares from a broker and sold them for around $6.92 per share. He then returned (or covered) the same number of shares back to the broker at $5.98 per share.

His profit: $9,400.

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