The insanity has got to stop, people.
Shares of Blockbuster jumped about 74% on Wednesday. The stock soared as high as $0.378 per share on prodigious volume, topping 69 million shares. In fact, the SEC actually halted trading in its shares after it plunged more than 40% today. Overall, it's more than a five-bagger since parent company DISH Network (Nasdaq: DISH ) introduced a Blockbuster-branded streaming video plan last week. That kind of share-price appreciation doesn't grow on trees. For instance, five years ago, acknowledged growth monster Hansen Natural took a year to post the type of gains that Blockbuster achieved in a week.
If DISH plays its card right, the Blockbuster brand might once again pose a threat to the video-rental operations of Netflix (Nasdaq: NFLX ) and Amazon.com (Nasdaq: AMZN ) . A widely distributed research report restated all these facts yesterday, fueling another day of dramatic gains. How's that for a supposedly dead stock, huh?
Sadly, all those gains are built on vapor and mirages and really shouldn't have happened at all. This is not investing; it's betting everything on 13 Black.
Trial of the Knave of Hearts
Follow me down the rabbit hole. Don't worry -- it's a jarringly short trip.
- Blockbuster's Investor Relations page still exists. But it's a Spartan affair that directs you to DISH Investor Relations for business information -- and to a claims agent for "information about the former Blockbuster stock." Emphasis mine, of course.
- Click through to the claims agent, and you're told in no uncertain terms that BLOAQ and sister stock BLOBQ are, for all intents and purposes, dead: "None of the publicly owned stocks issued by the Parent prior to the commencement of the chapter 11 cases, including its Class A and Class B common stock, which are currently trading on the OTCQB under the symbols BLOAQ and BLOBQ, respectively, are or will become securities of or have any interest in DISH or New Blockbuster, which are independent, non-debtor companies."
The statement goes on to explain that "even though the Parent's common stock continues to be quoted on the pink sheets, it has no value." In fact, they aren't shares of Blockbuster at all anymore, but of the ominously renamed "BB Liquidating Inc." shell of Blockbuster's former glory. The ticker symbols themselves are changing, even.
You might as well trade rainbow futures or starlight options, folks. Buying or selling Blockbuster stock -- sorry, I mean BB Liquidating shares -- is not investing in anything connected to the Blockbuster brand, but gambling on hopes that a greater fool (lowercase, if you please) will come along to be scammed worse than you were.
Blockbuster is not the only example of this faux-investing craze. You can still trade shares of Borders Group even after all its stores have been liquidated and closed. The ghost of Circuit City roams the halls of Wall Street long after its demise with an average daily volume of 119,000 shares. In this case, "its shares of common stock were deemed cancelled" last November -- and a significant horde of speculators still poke at the corpse.
So please don't buy Blockbuster shares to take advantage of the seemingly resurgent brand name. It doesn't belong to the BLOAQ version of Blockbuster anymore, but to its new parent company. You really want DISH shares if you see investable value in this name.
I have no illusions of stemming the tide of market insanity with this little missive, of course. But if I can inspire one investor to stay away from the Blockbuster casino, I've done my job here. And then I get to do it all again when Research In Motion (Nasdaq: RIMM ) and RadioShack (NYSE: RSH ) go down for the final count, both destroyed by an implacable wireless industry. It's no coincidence that "wireless" sounds so much like ruthless, relentless, and merciless.
The next time you see a penny stock racing to improbable gains like these, do yourself a favor and look up the company's Investor Relations page. If you're looking for a real investment, I'd suggest thumbing through "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." That special report details the winners in several deadly rivalries, and it's yours for the irresistible price of free. Get yours today!