JUNE 2008 W4 ALERTBlockbuster-Circuit City Deal Rumored to Be a Bust; Blockbuster Stock Climbs
<Reuters><June 25, 2008>In a story that is not that unusual on Wall Street, shares of Blockbuster Video rose nearly 13% on Tuesday, and another 1% on Wednesday on rumors that their potential deal to acquire Circuit City has fallen apart.
Reuters is reporting that investors are speculating that the deal is falling apart and spoke with Wedbush Morgan analyst Edward Woo who said, “People thought it was a bad deal, and Blockbuster shares went down. Now people think the deal is going to get passed off and the stock is going up.”
Circuit City recently reported a wider-than-expected quarterly loss which caused a dramatic drop in its stock price and market valuation. This factor may cause Blockbuster to lower its purchase offer, if they go forward at all. But many on Wall Street feel that Circuit City’s large loss and subsequent stock price drop calls into question the company’s ability to turn its business around.
A Blockbuster spokesperson said the company would move forward with a Circuit City deal “if it makes sense financially and strategically and also creates significant value for our shareholders.”