by Bill Singer
UPDATE: The Comeback Story of BLOAQ : On the Radar, On Fire, And . . . hmmmm
October 12, 2011
This morning I got a call from a Wall Street veteran who knows his stuff. He asked me if I had been watching or heard anything about BLOAQ.
"Isn't that the old Blockbuster?" I asked
"Yeah, it's the liquidating stock from their bankruptcy," he said.
"I heard that Dish Networks had bought the old Blockbuster," I said, "and then there was some chatter about how Netflix had recently made some significant mistakes when it split its business in two and raised its fees. If you follow the online gabfest, you're supposed to believe that Netflix has opened the door of opportunity to Dish and, somehow, for Blockbuster."
"Yeah, right," he said with a heavy dose of sarcasm. "You seen the stock today?"
I pulled up BLOAQ on my Level II screen and saw that today (Wednesday, September 28th) the stock was up about 33%. Whoa! 33%!!
I then pulled up a multi-day chart and saw that BLOAQ had exploded from a September 19th price of about 7 cents to today's range of 20 to 30 cents. The liquidating shares of Blockbuster have nearly quadrupled in about ten days. Of course, it's a tad odd to have a sentence with "liquidating shares" of a bankrupt company coupled with the "nearly quadrupled" result of the stock's recent share price.
Okay, so, I looked to see what's the hub-bub online. Uh huh, I see some of the usual suspects when it comes to public relations for the so-called next, hot stock. The pumpers, the newsletters, the promoters seem out in full force on this one - which is not to suggest that there may not be some merit in the whole Netflix-Dish-Blockbuster story but, you know, I'm a card-carrying skeptic. Just like the guy who called me about this story.
So, what's the chatter today? Comeback story. Rally. Inspiring. Up Over 100%. On Fire. Tearing Up the Charts. On Our Radar.
After a few minutes of comparing notes, my source and I ended our conversation. I fully appreciated his frustration. After several days of what he saw as blatant touting, he was wondering whether any regulator would proactively poke around. Okay, so he didn't put it that politely. It was more like where the hell are the regulators?
It's hard not to look at BLOAQ and raise at least an eyebrow. You got a stock that skyrockets from 7 cents to 30 cents within a few days and there just doesn't seem to be any convincing explanation for that spike - beyond a lot of speculation and the same-old-same-old list of touter's adjectives and adverbs. Of course, the explanation could well be that there's nothing fishy here, and if that's the case, great. On the other hand, this has an uncomfortably familiar look to it. Of course, there's nary a word from FINRA, the SEC, or any regulator.
How about we all keep an eye on this one to see if there's substance to this comeback-story rally that's on the radar, on fire, and tearing up the charts.
If you buy now and make a bundle, you heard it here first.
If you buy now and lose your shirt, you heard it here first.
Either way, I want the credit.
FIRST UPDATE (September 29, 2011)
Subsequent to the initial posting of this "Street Sweeper" column, a Form 8-K filed on September 28, 2011, by Blockbuster Liquidating, Inc. stated in pertinent part
Item 7.01. Regulation FD Disclosure.
As previously disclosed, on September 23, 2010, Blockbuster Inc. (the "Company") and certain of its domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief (the "Bankruptcy Filing") under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") case number 10-14997.
On April 6, 2011, BB Liquidating Inc. (f/k/a Blockbuster Inc.) (the "Parent") and its debtor affiliates (collectively, the "Debtors") entered into a Purchase and Sale Agreement (as amended and restated on April 20, 2011, the "Purchase Agreement") with DISH Network Corporation ("DISH"). Pursuant to the Purchase Agreement, DISH agreed to purchase substantially all of the Debtors' assets (the "Asset Sale"). On April 26, 2011, the Asset Sale closed, whereupon DISH acquired all of the rights, title and interests in and to the Debtors' assets, including, without limitation, the "Blockbuster" trade name.
As a result of the Asset Sale, the Debtors have no further business operations nor assets to liquidate. DISH is the current owner of the "Blockbuster" brand, inclusive of its ongoing retail, internet, and by-mail distribution channels. It is the Debtors' understanding that such ongoing business operations are being managed by Blockbuster L.L.C. ("New Blockbuster"), which is an affiliate of DISH and a non-debtor entity. Accordingly, all inquiries concerning the ongoing business of New Blockbuster should be directed to DISH and the success or failure of New Blockbuster will have no impact on the recoveries anticipated in these chapter 11 cases for either creditors or equity interest holders of the Debtors.
None of the publicly owned stocks issued by Parent prior to the commencement of these chapter 11 cases, including its Class A and Class B common stock, which are currently trading on the OTCQB under the symbols BLOAQ and BLOBQ, respectively, are or will become securities in DISH or New Blockbuster, which are independent, non-debtor companies.
The Parent is currently in the process of changing the trading symbols for the Class A and Class B shares to maintain consistency with the change of the Parent's name to BB Liquidating Inc.
As detailed in Parent's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on July 12, 2011, the Debtors continue to remind investors of their strong belief that there will be no value for the common shareholders in the bankruptcy liquidation process, even under the most optimistic of scenarios. Shareholders of a company in chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In these cases, because the Asset Sale proceeds are significantly less than the Debtors' administrative liabilities, the Debtors anticipate that Parent shareholders will receive no value for their shares of its common and preferred stock. Accordingly, even though the Parent's common stock continues to be quoted on the pink sheets, it has no value and Parent's shareholders should not view the trading activity of its common stock on the Pink Sheets or any other market or trading platform as being indicative of the value Parent's shareholders will receive as part of the chapter 11 cases or in connection with any subsequent chapter 7 liquidation.
Bill Singer's Comment
As of 9:30 AM EDT this morning (September 29th), BLOAQ was subject to an SEC Trading Halt. READ the SEC's ORDER OF SUSPENSION OF TRADING, which halts trading from "9:30 a.m. EDT, September 29, 2011, through 11:59 p.m. EDT, on October 12, 2011 ." According to the Order:
[T]here is a lack of current and accurate information concerning the securities of BB Liquidation Inc. because of assertions in third-party press releases to investors concerning, among other things, the company's current financial condition and business prospects.
As I noted yesterday, ya gotta be careful before diving into this stuff, particularly when the usual suspects seem to be pushing and shoving. Frankly, this could have been a mirror image - a solid company that was getting trashed and pounded by professional shorters and bashers. Ultimately, it just doesn't matter. When you see a rapid move in any direction and the pond scum and bottom feeders suddenly appear, you sure as hell better make sure that you're willing to risk it all on a throw of the dice, and that you accept the fact that the dice may be loaded.
This morning I'm satisfied that I did my job and the right thing in firing off yesterday's warning flare. I'm also glad that I contacted both the SEC and the Financial Industry Regulatory Authority with my concerns. Of course, I'm not going to hold my breath in expectation of hearing back from those regulators.
Of course, in the end, I'm still scratching my head as to why folks jumped in at 6 cents and stayed on for the ride. I mean, geez, consider this line in the 8-K:
Accordingly, even though the Parent's common stock continues to be quoted on the pink sheets, it has no value and Parent's shareholders should not view the trading activity of its common stock on the Pink Sheets or any other market or trading platform as being indicative of the value Parent's shareholders will receive as part of the chapter 11 cases or in connection with any subsequent chapter 7 liquidation. . .
SECOND UPDATE (October 10, 2011)
About two weeks after I first broke the story and well after the suspicious trading at issue should have been on the radar of Wall Street's regulators, on October 10, 2011, FINRA issued a Press Release: Companies in Bankruptcy Rarely Make Blockbuster Investments . In pertinent part, the release warns:
FINRA is issuing this Alert because we believe that there may be investor confusion in the market regarding the bankruptcy of Blockbuster, Inc., (BLOAQ, BLOBQ) and that some stock promoters may be trying to exploit that confusion.
[A]ccording to multiple public disclosures, BB Liquidating, Inc. has no further business operations or assets, although its shares still trade under the BLOAQ and BLOBQ symbols.
The SEC temporarily suspended trading in BLOAQ on September 29, because of "a lack of current and accurate information concerning the company's securities due to assertions in third-party press releases to investors concerning, among other things, the company's current financial condition and business prospects." For instance, one report stated that "Blockbuster is Back From the Doldrums" and "is now becoming a promising comeback story." Another website described BLOAQ as a " … global media entertainment provider, which exited Chapter 11 protection earlier this year…"
In fact, the company has not exited bankruptcy, and the company itself stated in a recent SEC filing that even though its shares continue to be quoted on the Pink Sheets, they may have "no value." In another recent filing, the company stated that there are "no further business operations nor assets to liquidate" and noted any financial success associated with the company that acquired the Blockbuster brand would have "no impact" on the value of the BLOAQ and BLOBQ shares. . .
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SPECIAL APPEARANCE
On November 14, 2011, Bill Singer will be the afternoon's Keynote Speaker at the Fall Symposium of the National Association of Independent Broker Dealers ("NAIBD"). Bill's appearance is scheduled for 2:30 - 3:15 PM at Bayard's in New York City.
For information about this day-long event, VISIT