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Shares of Blockbuster Inc. (NYSE: BBI) were up 16.92% on Monday after Hollywood Entertainment founder Mark Wattles disclosed a 5.7% stake in the company.In the 13-D filed with the SEC, Wattles made a point of expressing his confidence in the company's future:
"Mr. Wattles does not believe that the issuer has a motive to reorganize under Chapter 11. In addition, regardless of likelihood of obtaining a 'going concern' qualification from its auditors, Mr. Wattles believes the issuer will be successful in refinancing its revolving bank line of credit, or if it cannot, that it will be able to use cash flow from operations to meet its August repayment obligations."
Wattles is a rich man because he was able to sell Hollywood Entertainment to Movie Gallery -- and the resulting debt load eventually led the company into bankruptcy. The irony of Mr. Wattles' investment in Blockbuster is that if Blockbuster had bought his company, it would be in bankruptcy.
It's also worth noting that as smart as Wattles is, he also lost big on his investment in Circuit City, which ultimately filed for Chapter 11 Bankruptcy and is now liquidating. Further adding to the fun: In one of the dumbest moves in history, Blockbuster made an unsolicited takeover offer for Circuit City before it filed for bankruptcy, but ultimately found religion and withdrew it.
It's indicative of how desperate the market is for bullish news on Blockbuster that it's sending the stock soaring on something as irrelevant as this.
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