Is anyone still buying blockbuster, this company is completely worthless at this point, why people actually thought this company is going to make it is beyond me, it was a given years ago that this company was going to file for bankruptcy. Remember they have over 4000 stores out there across the country and once they file bankruptcy and FINALLLLLLLY close these stores there will another 20,000 people out of work and thousands and thousand of empty stores for rent. No need for store fronts when you can click a button from the comfort of your own living room and order from the thousands of movies ready available for showing.
Lets not get ahead of ourselves here.. even if BBI does file which is highly unlikely this company I think will still be a turn around company. Have you read about the types of deals they have been getting? There on demand rental streaming program is being embedded as default into most new Toshiba players.. that's huge. They've unleashed 10k kiosks? It's going to take a while, I may get back into this soon. Kind of makes me think I should have shorted it at .49
CNBC interview with blockbuster's ceo http://www.cnbc.com/id/37732940?__source=yahoo|headline|quote|text|&par=yahoo
As I have been saying since my very first post here, the only way to play this at this point in time is not with the common stock, but with the sub 2012 notes. Because they will have to be dealt with, most likely out of court which all signs are still pointing to. The common stock will most likely experience dilution and thats basically what you're seeing priced in right now along with the fact that there is uncertainty and speculation with respect to their solvency. Also worth adding here, allot and I mean allot of folks are net short the stock here as a hedge for their debt positions. Blockbuster is still very relevant. They are on pace this year to hit $4B+ revenues. When you also factor in 28 day lead, Movie Gallery closings, new VOD offerings, etc. it has potential. Their biggest issue now is their current cost structure model and balance sheet. Once they get a grip on these two issues, the picture will be a different story. I personally find video on demand over rated and over priced. I realize there is a certain comfort level for folks with cable or satellite services to just sit down in their chair and push a button to order a brand new release, but at $5 a pop, that could seriously add up in a month. And just so you know, Blockbuster now has launched their online/on-demand services as well. You can get all brand new releases for $3.99. You can also buy on demand as well cheaper than what you would buy it in the stores for. You can also get tons of other movies on demand as well for $2.99 and/or less and/or some are even free of charge. Also and I can not believe no one is mentioning it on here, it was just leaked that Blockbuster has an exclusive app PRELOADED on the upcoming soon to be release DROID X. This is a very significant development. In terms of media oriented function/interface by the way, the DROID X blows away the iPhone. There is also chatter about blockbuster launching a Europe initiative for their kiosk platform. This would be huge as Europe is completely untapped. Everything runs there with plastic cards as well. It would be a perfect product to adopt. Keyes has this on his to-do list. And do not forget, Blockbuster is also on pace to hit the 10K mark for domestic kiosks by year end.
New DD Check out link below and the latest management filing. This gives a great overview of the future big picture direction of blockbuster and how they will achieve new business digital multi-channel platform milestone. And pay close attention to the section that starts labeled "Launched Products." Right under that is "Product Pipeline" >>>> NOTICE that among a bunch of other top tier electronics/technology companies, that SONY is in there. Could it be Blockbuster On Demand is coming to Wii ?? These guys have a great plan. They just need to do three things; increase new products/service offerings in growth spots (they have and are doing), get a grip of the cost structure model (they are doing) and deal with the debt side of the balance sheet (they are negotiating) http://www.sec.gov/Archives/edgar/data/1085734/000119312510137957/ddefa14a.htm
Depending on your broker website interface, you could get them from there. Go to trades, go to fixed income, go to corporate bonds, under issuer type in Blockbuster and that should generate a quote for you. However some sites like Scottrade, you would have to call. As far as the web goes, you can get them from the CXA marketwatch site. Just google search this: "Bonds stock market quotes" and the CXA site is the first hit. Right now, the 2012 sub notes have been trading at their all time low as the negotiations hit a snag recently. As a result they are presently trading in the $9.5-$10.00 range. Don't forget about accrued interest. That bumps it up another $2.50 or so. Basically for ever $5K face amount you buy, it would cost you roughly $500 plus another $115ish or so for accrued interest. In the latest CNBC link interview with Keyes, it really sounds like they have a strategic investor in play. So that would mean some kind of cash infusion while swapping out the 2012 notes for equity. The outstanding debt float for the 2012 notes is a face amount value of $300M. Now normally in the case such as Sirius or MGM casino, or YRCW, these notes would be an easy slam dunk 5 bagger+ trade. Because the debt always gets serviced first. In any capital structure this is the case; hence why the common stock gets diluted or crushed. What makes the blockbuster situation much more complicated on the distressed debt side is the fact that in addition to the 2012 holders, there is also a secured float of 2014 bonds who have priority over everybody. That is why the 2012's are sub or junior debt notes. And that is why they are trading right now for a mere 10 cents on the dollar. But its the only trade available to the average retail person. The 2014 notes are fetching 58 cents on the dollar but are institutional level assets and currently no retail broker can make a market in them.
So delta, what is the worst that can happen if I purchase these bonds.. ? And what are you hoping to happen when one acquires these subnote bonds, it wouldn't make a difference if they file a bk or not would it?
UPDATE DD & View: Huge difference if they have to go to court, file BK vs. coming to a negotiated re-structured settlement with the debt holders. In a nutshell, if they do have to go to court and file BK 11, the sub notes would, according to current market trading view, potentially be worth somewhere between 5-10 cents on the dollar. Some folks argue higher up to 20 cents on the dollar. It is really tough to gauge because of the previous complicated matters I outlined with the 2014's in play, the collateral Canadian assets going to the studios, etc.. So potentially you could still lose money even buying the notes at current market price in a worst worst case scenario. If blockbuster announces cash infusion, strategic partner, or negotiates a debt reorg with the bondholders, these notes will move back up. At this point, I have so much capital invested in these notes, I would just be thrilled to see $30> levels again. Some say significantly higher, but I am trying to conservative and realistic. Truth be told if I could do it over again, I would not have gotten into this trade in the first place at the point in time that I did. At current price of $10, the bonds properly reflect the risk reward of the situation and you would obviously lose allot less money in the worst case scenario more so then folks would bought these notes in the $20's, $30,s $40,s and higher. This is a very unique situation unlike my previous distressed debt trades. Blockbuster has dragged this out so long now, that pretty much all the equity in the common stock has been sucked out. Had they dealt with these notes last year, when PPS was in the $1 range, it could have been so much easier. They could simply have issued a secondary and sold more issued common shares on the open market and raised cash. Another thing that I don't like going forward fundamentally about blockbuster is that they really burn through cash flow. Now Keyes is asking for $100M more from the 2012's on a counter offer from their 95% equity stake + $30M in cash. And the deal they negotiated with NCR is a little suspect for me now that I have been digging into it. I still have yet to pinpoint what their actual share of the revenue stream is going to be from that entire platform. For instance if their cut is only 15 cents on the dollar from each rental, on one hand its going to give them a new revenue stream, but on the other hand, what if people stop going to the stores and start using the kiosks. That is going to ultimately to create an imbalance on the rev side and not a favorable one. Q2 numbers are going to be critical at measuring whats truly ahead!!! When you factor in Avatar, the 28 day lead, Movie Gallery closings, they need to really hit the numbers out of the ballmark. They better have SSS numbers that are way better than recent years. And at this point my thought is not bothering to stick around to see it play out. Its not worth the risk. If they announce favorable refi debt reorg at the meeting, the bonds will make the move that they are going to make. At that point I would strongly recommend taking some off the table. And like I said if it gets to $30+ I am completely exiting my entire position.