RICHMOND | Shares of Circuit City Stores Inc. dropped to a 17-year low in early New York trading after Blockbuster Inc. abandoned its $1.35 billion offer for the money-losing electronics retailer.
Circuit City shares fell 23 cents, or 9 percent, to close at $2.32 on the New York Stock Exchange - the lowest since February 1991. That values Richmond-based Circuit City at $391 million, less than a third of what Blockbuster said it might pay in April.
Blockbuster, based in Dallas, approached the electronics retailer in February with an unsolicited bid of $6 to $8 a share, pending a review of its books. Circuit City, which has lost money for the past two years, agreed to the examination after billionaire investor Carl Icahn said he would step in if Blockbuster couldn’t obtain financing.
Circuit City, which has lost 85 percent of its stock market value in 12 months, may now be more attractive to another company or a buyout firm because a shrinking number of bidders probably means a lower asking price. Investor Mark Wattles said June 24 that Circuit City drew interest from at least two companies other than Blockbuster, as well as “a ton” of buyout firms.
Mr. Wattles, who owns 6.5 percent of Circuit City shares, has been seeking a buyer for the retailer. He gave up a proxy fight and a push for new management after Circuit City agreed to support three of his director nominees. They were elected last week.
The retailer “certainly could be in play,” said Arvind Bhatia, an analyst at Sterne, Agee & Leach.
Circuit City’s exploration of strategic alternatives is “an active and ongoing process” and not dependent on Blockbuster’s participation, spokesman Bill Cimino said.
The chain has posted losses in six of the past seven quarters, and sales have dropped five quarters in a row.
Cash and short-term investments fell 75 percent in the three months that ended May 31, signaling Chief Executive Officer Phil Schoonover’s attempt to stem market-share losses to Best Buy Co., his former employer, and Wal-Mart Stores Inc. hasn’t worked.
Please read our comment policy before commenting.