Blockbuster Exploring Bankruptcy?

Blockbuster shares (BBI: 0.3987 0.00%) sank 77% today as news came out that the company had hired Kirkland & Ellis LLP to explore a possible bankruptcy filing according to a Bloomberg article. The company currently has 7,500 stores and has faced increasing pressure from Los Gatos-based NetFlix (NFLX: 71.28 0.00%). 

A bankruptcy by Blockbuster would hit many smaller investors particularly hard as many of the properties were sold off as single or two-tenant NNN leased investments, and often were priced at levels that left no room for error (or bankruptcy).

Ultimately, I think Blockbuster is as good as gone in its current form. A bankruptcy filing will be used to restructure the company into one which competes head to head with Netflix for mail-by-delivery business, and increasingly on-demand streaming of the videos, eliminating the need entirely for a physical retail presence.

Bottom line is if you have a Blockbuster in your retail center, it might be wise to start looking for a replacement.

Update (03/04): Blockbuster has denied bankruptcy rumors, but….I still think the business model is dead in its current form.

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