Companies in Bankruptcy Rarely Make Blockbuster Investments

FINRA is issuing this Alert because we believe that there may be investor confusion in the market regarding the bankruptcy of Blockbuster, Inc., (BLOAQ, BLOBQ) and that some stock promoters may be trying to exploit that confusion.

 

Blockbuster is a former NYSE-listed company that filed for Chapter 11 bankruptcy on September 23, 2010. In April 2011, almost all of Blockbuster's assets, including the "Blockbuster'' trade name, were acquired by DISH Network Corp. (Nasdaq: "DISH"). The remaining entity changed its name to BB Liquidating, Inc. According to multiple public disclosures, BB Liquidating, Inc. has no further business operations or assets, although its shares still trade under the BLOAQ and BLOBQ symbols.

 

The SEC temporarily suspended trading in BLOAQ on September 29, because of “a lack of current and accurate information concerning the company’s securities due to assertions in third-party press releases to investors concerning, among other things, the company's current financial condition and business prospects." For instance, one report stated that "Blockbuster is Back From the Doldrums" and "is now becoming a promising comeback story." Another website described BLOAQ as a " ... global media entertainment provider, which exited Chapter 11 protection earlier this year…”

 

In fact, the company has not exited bankruptcy, and the company itself stated in a recent SEC filing that even though its shares continue to be quoted on the Pink Sheets, they may have “no value.” In another recent filing, the company stated that there are “no further business operations nor assets to liquidate” and noted any financial success associated with the company that acquired the Blockbuster brand would have “no impact” on the value of the BLOAQ and BLOBQ shares.

 

FINRA cautions investors that bankrupt companies can be targets of online stock tips that can be confusing, inaccurate, misleading and in some cases fraudulent. Furthermore, FINRA reminds investors that holding shares of any company involved in bankruptcy, or buying shares in a bankrupt company in the hope that those shares will surge in value down the road, are highly risky courses of action and can lead to financial loss.

 

For additional information see FINRA’s Investor Alert, Investing in a Bankrupt Company: A High Risk Venture.

 

Last Updated: 10/10/2011