Blockbuster Shares Suspended on NYSE

Need more proof that times are tough? Well, according to reports coming out this morning, rental chain Blockbuster is teetering on the edge of bankruptcy. The company, long synonymous with movie rental, has been hit hard lately with competition from online services like Netflix and GameFly. In the past five years, Blockbuster’s stock has plummeted from around $17 per share to just barely over a buck a share. Then yesterday, as word started to eke out that the company might be looking into filing bankruptcy proceedings, the shares tanked 76 percent, down to $0.22 per share, before the New York Stock Exchange suspended trading in the company.

Though Blockbuster admits that it’s been talking to law firms and banks about financial restructuring, officially, the company is denying the bankruptcy rumors. Blockbuster spokesperson Karen Raskopf told Reuters bluntly that “We do not intend to file for bankruptcy.”

How did Blockbuster end up in these recent financial woes? A big part of the problem seems to stem from the company spending a hefty chunk of change to build its own online rental service to compete with Netflix and GameFly. Also, the chain’s 7,000 plus brick and mortar stores were hit by a drop in business, due to more and more customers shifting to video downloads or having discs mailed to their homes. The drop in business at storefronts and the heavy spending to catch up to online competitors has all caught up with Blockbuster, resulting hundreds of millions of dollars in debt. Meanwhile, competitors like Netflix are seeing strong returns, with shares having jumped more than 13 percent yesterday before settling down to close 5.9 percent higher at $36.36.

So, can Blockbuster recover from this latest string of problems and avoid sliding down the bankruptcy path? Or is that iconic yellow and blue movie ticket about to get punched for good? Only time will tell.