Still Better Than a "Pluto Nash" Sequel
By
Rick Aristotle Munarriz
December 24, 2007
|
What do Ishtar 2, Pluto Nash 2, and Movie Gallery (OTCBB: MOVIQ.PK) stock have in common? You won't see any of the three on the big screen, because they're all as good as doomed.
Movie Gallery filed its bankruptcy reorganization plan over the weekend. Creditors will be receiving equity in the troubled DVD-rental chain, perhaps worth pennies on the dollar. Don't laugh, common-stock investors. If the plan is approved next year, those shares you're holding will be rendered worthless, with brand-new stock issued for the secured and unsecured creditors.
This shouldn't take anyone by surprise. Movie Gallery filed for Chapter 11 two months ago, and shareholders getting taken out at nil is about as common as sticky soda spills on a theater floor.
Investors surely saw this coming. Despite closing hundreds of unprofitable Movie Gallery and Hollywood Video stores, the company still had to ask for lifeline extensions from its creditors several times since this summer.
It surprises me to find that 215,600 shares of Movie Gallery traded hands between $0.063 and $0.067 Friday, even with looming cancellation as the only way for creditors to get a fair shake. With 390 minutes in the trading day, I guess there really is a penny-stock-speculating sucker born every minute.
The upside for Movie Gallery fans -- though obviously not for its actual common-stock shareholders -- is that the leaner obligations saddled to the 3,650-unit chain will give it a better chance to compete against bricks-and-mortar rivals Blockbuster (NYSE: BBI) and Hastings (Nasdaq: HAST).
Mail-order and digital delivery specialists like Netflix (Nasdaq: NFLX), Apple (Nasdaq: AAPL), and Amazon.com (Nasdaq: AMZN) that figured they could carve out Movie Gallery's client base will have to look elsewhere. The chain, for now at least, will survive.
Some other Foolish headlines to get investors through the misery:
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