Blockbuster - Profiting More Than the Profiteers

We all know that institutional investors have purchased Blockbuster (BBI) stock at much higher levels, most notably Carl Icahn who owns over 20 million shares. In Mid-June, Marathon Asset announced their acquisition of 5.1% of the company. At the time the stock was trading at approximately $2.80-$2.90 per share, nearly a 20% premium to today's price.

Turnaround efforts helped Blockbuster post better-than-expected profits for the fiscal first quarter in May, boosted by cost cutting, including store closures, reduced advertising and overhead expenses and a more profitable product mix. And, the fact that Blockbuster has abandoned a potential takeover of Circuit City has removed considerable risks from the stock. Yet, the market has failed miserably to factor in these developments.