Less than two weeks ago, shares of Movie Gallery Inc. (NASDAQ: MOVI) surged more than 17% on news that the company was closing 13% of its stores. On Monday, the stock is set to tank on reports that the company is on the verge of filing for bankruptcy protection in a prepackaged deal that would exchange its debt obligations for equity.
According to The Wall Street Journal (subscription required), "The Dothan, Ala., company will file for bankruptcy this month and hopes to emerge from Chapter 11 in early 2008, according to people with direct knowledge of Movie Gallery's plans. They spoke on condition that they not be identified."
The company is burdened with a massive debt load, much of it the result of its ill-conceived $1 billion acquisition of Hollywood Video in 2005. Interestingly, Movie Gallery outbid Blockbuster Inc. (NYSE: BBI) for that prize: File that one under Pyrrhic victory.
Brick-and-mortar movie rental outlets have struggled with competition from services like Netflix Inc. (NASDAQ: NFLX) and Blockbuster's Total Access program.
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Reader Comments (Page 1 of 1)
10-10-2007 @ 6:21AM
Eldon Monk said...
BBI @ $10?
Maybe. Blockbuster, with many of its stores in close proximity to Hollywood Video stores, will be the obvious short-term beneficiary of Movie Gallery closing 520 of its HV stores, with possibly more closings to come.
Long-term, Blockbuster with its bricks-and mortar, mail-in, and on-line venues, has a more well-rounded package than Netflix with its mail-in only.
10-12-2007 @ 5:13PM
AJ said...
Maybe Movie Gallery/Hollywood Video should think of buying a Movie Dowload Rental Company like Reeltime Rentals who owns the downloading technology(to bring them back to life from bankruptcy)!
10-16-2007 @ 7:40PM
KT said...
looks like they did www.chapter11library.com
10-17-2007 @ 10:07AM
linda said...
i think netflix and movie gallery should merge somehow...would help both companies