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Wattles Sells Remaining Hollywood Stake

4 Apr, 2005 By: Erik Gruenwedel

As expected, Mark Wattles, founder and former chief executive of Hollywood Video, has sold his remaining shares in the company for $13.20 per share, or more than $39 million.

Last week, Wattles announced the sale of 2.15 million shares of Hollywood stock, from March 22 to March 24, for $14.07 to $14.15 per share.

The sales marked a turnaround for Wattles, who, in days leading up to Blockbuster's March 24 deadline for Hollywood shareholders to act upon its $14.50-per-share hostile bid, had expressed interest in buying up to 50 percent of Hollywood stores in an apparent desire to assist Blockbuster's bid.

The next day, Blockbuster officially terminated its tender offer for Hollywood.

“Blockbuster is not in the picture anymore, so what [Wattles] has done is something we should have expected,” said Arvind Bhatia, media analyst with Southwest Securities in Dallas.

Conversely, Bhatia said maverick investor Carl Icahn's purchases last week of 1 million shares of Hollywood common stock could be viewed as more than an arbitrage, or “free lunch” transaction that in theory costs nothing to implement, has a positive probability of a payoff, and a zero probability of a negative payoff.

Icahn purchased the shares for $13.15 per share, and today the stock is trading above $13.25 per share.

“From a return standpoint, he could get a nice return in about a month,” Bhatia said. “Certainly some people would speculate that there is more than meets the eye. And the market is starting to think that too as the stock is up [to $13.28 per share in mid-day trading].

“Whoever is paying $13.28 is making the bet that there is more than $13.25 per share that they can sell the stock for. That is the only reason somebody would pay more than $13.25 today,” he said.

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