When Blockbuster (NYSE:BBI) said it would buy Circuit City (NYSE:CC), it may not have occurred to many on Wall Street that the movie rental company did not have the money to do the deal.
Surprise.
According to The Wall Street Journal, "Concerns about Blockbuster's methods for financing a bid contributed to a sharp fall in the company's shares when it announced its move last week." Blockbuster investor Carl Icahn may help put up some of the capital and there is cash on the Circuit City balance sheet.
Part of the argument for Circuit City being a good buyout target is because its shares are down more than 40% in the last six months. Those who bother to look at a stock chart will see that Blockbuster shares are down by the same amount during that period. Circuit City now has a market cap of $740 million. Blockbuster's is only $605 million.
All of this data is simply data. The biggest reason for Blockbuster to drop its bid is that, if it has not been able to fix its own company, how does it expect to fix Circuit City?
Douglas A. McIntyre is an editor at 247wallst.com.
Oil hits record $127.43 on supply concerns, raised Goldman forecast
Icahn's 'shock and awe' on Yahoo -- a gutsy play
Housing starts surprisingly rise in April on apartment construction
