Wednesday, May 21, 2008

Is The Party Over For A Blockbuster/Circuit City Deal?

At the same time that Circuit City's share price has dramatically tanked, Blockbuster's has risen dramatically.

For those of you who don't follow these things, typically with merger announcements and rumours thereof, the target stock rises towards the putative buyout price, while the purchaser’s stock declines, in anticipation of the short-term impact of debt and suchlike on fiscal performance. This is precisely what happened when Blockbuster first announced their intentions. Now the opposite is occurring, which leads me to wonder if institutional investors either think or know that Blockbuster’s going to walk away.

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