Blockbuster is fighting tooth and claw to remain a US public company, and although it is below the minimum market capitalization for a New York Stock Exchange company, the Exchange has accepted that it has a viable plan to turn that around.
Blockbuster now has until September 2011 to comply with the average market capitalization standard. Blockbuster was notified of the problem back in March after a consecutive 30 trading-day period where its average value was below the $72 million mark. Today its market cap is around $57 million. NYSE rules state that no stock can average below $1 for a 30 day period and Blockbuster has out around 72 million shares. Right now its common stock is at $0.27, way below the requirement.
The company will artificially try to get back within these guidelines by converting all of its shares into the same class and conducting a reverse stock split after it gets approval at its June 24 stockholder meeting.
Solving this technical default of the company’s stock is a lot easier perhaps than turning around its real world business. In May it announced its first quarter to April 4th with revenues of $939.4 million down from $1.09 billion the previous year, with a reduced gross profit of $502 million, as its number of stores declined and margins more or less held up giving it an operating loss of $29.4 million and a net loss of $65.4 million, compared to operating income last time of $50.2 million and net income of $27.7 million.
Blockbuster had $109.9 million in cash and cash equivalents but is valued at less than the cash it holds because it used $50.8 million last quarter and appears only to have a couple of quarters of life left at that burn rate.
CFO Tom Casey said at the time that his aims were to lower the cost of the company’s debt, aggressively reduce operating expenses and find operational efficiencies. So no new business model on the near horizon then.