Monday, April 19, 2010

Blockbuster (BBI) Insanity Typical of Today's Market Action

We are still seeing high levels of call buying despite the bad news on Friday, which suggests that the competition is still greedy and not fearful, which, as a bear, is what I want to see.

Blockbuster (BBI) up huge today (50%!), even though its 2012 notes trade at 25 and haven't budged. The only news is that the company has delayed the shareholder meeting, while they work on recapitalizing the company.

Here's a hint for the equity market cretins: a recapitalization means a massive dilution of the equity in order to get out from under the crippling debt load. The 2012 notes yield over 90% at the current price, which confirms the view that the equity has no value.

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