Its really going to be cut and dry move based on results and guidance which I can not predict. And unfortunately not much you can do before hand with respect to the common stock, other than a pure speculation buy. Although I am optimistic on them reporting better revenues and cash flow this coming week, you just never know sometimes. Keyes has stated previously that BK was off the table. But then in a more recent filing, there was the obligatory concern that things need to improve or down the road they could cease to function and file for BK 11 protection. Keep in mind though, this same disclosure was referenced in their annual filing last year, just months before JP Morgan gave them $675M in a secured offering that priced at near par.
Allot of people have been misinformed and just have the wrong idea of whats going on with BB. They have clearly made all the right strategic moves in terms of driving revenues higher, creating new streams of rev production, improving cash flow, maintaining cash on hand to pay down debt/interest, and dumping stores in turn for kiosks along with a complete digital transformation. BB is going to be the end all be all for movies anywhere you are and want to go. I can NOT believe no one is talking about that huge milestone they achieved this past week with their new API deal. They are gonna be launching "Blockbuster Everywhere." One single platform that allows you to get movies on any media device, cell phones, Ipads, laptop, computer, TV, kiosk, downloads, on demand. You name it.
There is also some huge speculation right now going on with the Carl Icahn move to LionsGate. He got the poison pill dumped so he is pretty much gonna lock that down. His goal is turn LionsGate into a pure distribution company. Well guess who has the largest and greatest media movie library?? That would be blockbuster. And Keyes recently said in an interview with respect to Carl Icahn dumping shares that Carl can now do more for them on the outside than he could have on the inside.
Bottom line, IMHO this is one of the greatest opportunities I can recall in years. The only critical piece to this, is that we need to start seeing improvements now on the cash flow & rev side. As long as that happens and we get some more insight with respect to the debt recap initiative, which we will in June, everything is going to come together. Keyes and the CFO talk to the majority debt holders on a daily basis. They are in constant communication.
Buying the stock has the most risk in this scenario because you still never know if dilution may occur at some point. We just have no way to tell. That is why I am playing the debt here. As far as hedging your common stock positions, at this point, with PPS under .40, nearest strike out of the money puts are just too expensive. If the stock ramps, those puts will evaporate. On the same token, if the stock tanked, your maximum profit is like .30-.35 or so per put depending on how far out you go. The further out you go, the less you will make because the more time premium and IV you will pay.
