Just six months after Blockbuster made its ridiculous offer to
buyout Circuit City (CC)
for 1.35 billion, now Circuit City is filing for bankrupcy.
First off, what does this tell you about Blockbuster's
management. Everyone involved, including Carl Icahn, now have egg in their face. Although
they ultimately did not pull the trigger on the buyout, it was
still the journalists, analysts, stockholders and observers who
altogether gasped at that news before Blockbuster's management
blinked.
Meanwhile, while one company's reputation falls, another one
rises. Best Buy (BBY)
is the big winner in all this. Circuit City was already
closing many stores. Now they will have to close more or sell
out giving up further market share to Best Buy, the undisputed
champion of this space. Who are the losers? The
shareholders, of course.
One of the biggest shareholders is Los Angeles based First
Pacific Advisors, LLC with over twelve million shares according to
their latest filing. Circuit City's creditors are also in
trouble with all this and will likely have to be more conservative
with future deals.
The economy is in a downward spiral and this is moreso a
reminder that the troubled players are in the biggest
trouble. Circuit City's troubles should have become apparent
to all of us when they rejected Blockbuster's bid, knowing full
well that when they opened up their books for inspection, what they
would have revealed was a disaster waiting to happen. Yet,
shareholders hung on.
In this scary market, it's time to pay close attention!
Circuit City did not necessarily reject the bid because it was too
low. They rejected it because they did not believe
Blockbuster…
