CHICAGO (MarketWatch) - Shares of Blockbuster Inc. plunged 77% Tuesday after a published report said the video rental company is considering a possible bankruptcy filing.
Shares were down 74 cents at 22 cents in afternoon trading before trading on the shares was halted. The stock has already fallen 93% in the past year.
Dallas-based Blockbuster has hired Kirkland & Ellis LLP to help it look into various restructuring options, which may include a "pre-packaged" or "pre-arranged" bankruptcy, Bloomberg reported, citing an unnamed source close to the situation. In such a bankruptcy, most of the restructuring would be accomplished outside of court, the news service said.
A Blockbuster spokeswoman did not immediately respond to a request for comment.
Blockbuster faced serious challenges even before the worldwide economic collapse, which has made consumers more cost-conscious. Online DVD rental pioneer Netflix Inc. Netflix, Inc has cut severely into the company's share of the market over the past several years with its DVD-by-mail service.
Blockbuster countered with an online offering of its own, which eventually evolved into Total Access, a program that enables online Blockbuster customers to return DVDs through the mail or redeem them at a store for movie rentals.
However, despite encouraging signals, Blockbuster's pullback in marketing spending and a price increase for Total Access ended up benefiting Netflix greatly last year. Netflix had its most successful quarter to date in the period ended Dec. 31.
To a lesser extent, Blockbuster is also pressured by Apple Inc. which began last year to offer a movie-download rental service via its iTunes online store. Netflix also offers downloads.
In response, Blockbuster made a controversial offer to acquire troubled retailer Circuit City last April, but withdrew the bid after completing its due diligence. Blockbuster operates more than 7,500 stores worldwide.
Tuesday, March 3, 2009
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