Blockbuster will combine stock classes

PHYSICAL: Retailer gets non-compliance note on low share price

By Danny King -- Video Business, 11/23/2009

NOV. 23 | PHYSICAL: After receiving a non-compliance note from U.S. regulators last week for its low stock price, Blockbuster will combine its class-A and class-B shares into a single class in an effort to improve liquidity and dispel confusion over the company's stock structure.

The stock combination is subject to a stockholders' vote at the largest U.S. movie-rental chain's annual meeting in mid-2010, Blockbuster said in a statement. The company's two-class share structure stems from its previous ownership by Viacom, which spun off Blockbuster in 2004, a decade after acquiring the chain.

Blockbuster's decision to combine shares was made as the company received a non-compliance note from New York Stock Exchange regulators stemming from the fact that the share price has averaged less than $1 over the previous 30-day period. The company could be delisted if its share price doesn't average at least $1 over the next six months.

Blockbuster's share price exceeded $5 as recently as late 2007 but fell as low as 13¢ a share in March when reports surfaced that the company, which had hired a law firm for advice on refinancing its debt, might declare bankruptcy . Blockbuster, whose share price last closed above $1 on Oct. 23, said earlier this month that its fiscal third-quarter loss widened on a 21% drop in revenue largely stemming from the company's efforts to cut advertising and keep DVD inventory levels steady to set itself up for a $675 million refinancing agreement secured late last month.

The company, whose CEO last week defended its strategy of keeping its stores as it broadens its digital delivery and kiosk presence, faces widening competition from Coinstar's Redbox unit, which boosted third-quarter sales by 90% from a year earlier as it added 2,700 kiosks to bring its total to more than 20,000. Blockbuster and ATM-making giant NCR last year agreed to a licensing agreement in which NCR will deploy as many as 10,000 Blockbuster Express kiosks by mid-2010.

Blockbuster shares fell 10¢, or 14%, to 64¢ a share in regular trading today.