This Stock Is Going to Zero, and You Know It

BB Liquidating Company (BLIAQ.PK) is the discarded husk of former video rental king Blockbuster. The company ran into a digital brick wall, failed to compete, and filed for Chapter 11 bankruptcy protection. Now all of its assets belong to DISH Network (Nasdaq: DISH  ) , while the stock went through two ticker changes on its way toward oblivion.

And that's exactly where Blockbuster -- sorry, BB Liquidation -- belongs. The stock now has nothing whatsoever to do with Blockbuster's business, assets, or even the trade name, and is explicitly worth absolutely nothing. The original restructuring plan provided no hope at all for shareholders: "There would be no recovery by the holders of the Company's outstanding subordinated debt, preferred stock or common stock," the early filings said. 

That's right -- you, the common shareholder, get nothing.

So why am I dredging up this ghost of markets past? Because another well-known stock is headed down the same road right now. MF Global (NYSE: MF  ) has filed for the same Chapter 11 protection that Blockbuster went through, the company's "primary dealer" status on New York commodity exchanges has been suspended, and so has the stock itself. Oh, and millions of dollars' worth of customer money has reportedly gone missing. That'll have to get sorted out, too.

Like Blockbuster before it, MF Global's stock is inevitably going to zero now.

Zero, zilch, nada, nothing!
Businesses going through bankruptcy are worth nothing to us common investors. If anybody gets paid at all, that would be senior bondholders, lease landlords, and others with a contractual pipeline into the poor company's pocketbook. Your shares will be written off and worth nothing.

If MF Global ever comes back to the open market, that would probably be under a whole new batch of stock certificates that have nothing to do with the papers you hold today. Best-case scenario: You'll get replacement shares worth a small fraction of their original value. It'll take the mother of all turnarounds to generate a positive return after a conversion like that.

The jury is still out on MF's trading strategies, because the European sovereign debt on which the company bet big money could still turn out all right. But those papers have been underwater for so long that MF's positions have started firing off margin calls that the company can't handle, so whatever good news we get now will be far too late. Global's saving grace won't deliver until the coming Chapter 11 reorganization is but a distant memory.

Fun fact: The last recorded trade of Circuit City shares happened a month ago, even though shares were "deemed canceled" last November. It takes awhile to exorcise these ghosts.

Crazy, but it's true
Yet people still trade Blockbuster stock in spite of all the risks with absolutely no upside, and will probably do the same with MF Global once the SEC lifts the trading block. Day traders can luck out and make a buck here and there as share prices gyrate through wild swings -- a price change of a single dime is an 8.3% move when you're starting from $1.20 per share, as MF currently is. But even those hustlers will be left holding an empty bag when the bankruptcy filing comes.

To quote fellow Fool Chuck Saletta talking about the old General Motors (NYSE: GM  ) shares, Motors Liquidation Company, there's really only one logical explanation for this madness: "The market is nuts."

Here's the pudding
The long-term weighing machine that is the market goes completely bonkers in the short term. The fact that Blockbuster shares are actively trading hands even a year after the bankruptcy specter raised its ugly head is just another data point to prove that maxim. And if you need more evidence, take a look at these insane market value swings:

Company

52-Week High

52-Week Low

Top-to-Bottom Difference

E-Commerce China Dangdang (NYSE: DANG  )

$36.40

$4.50

709%

Amarin (Nasdaq: AMRN  )

$19.87

$2.89

588%

Travelzoo (Nasdaq: TZOO  )

$103.80

$20.68

402%

Dendreon (Nasdaq: DNDN  )

$43.96

$7.81

463%

Source: Google Finance.

Dangdang fell off an insanely lofty valuation when its publishing business started to show structural cracks and still trades near the bottom of this dramatic yearly trading range. Amarin raced ahead when its potential cardiovascular blockbuster drug, AMR101, seemed destined for fast-track FDA approval. Official Rule Breaker Travelzoo drew favorable comparisons to deal-handler Groupon in the spring but has failed to deliver on that promise in 2011. Right now, the company looks like dirt cheap buyout bait. And cancer-drug researcher Dendreon got a 65% haircut after one disappointing quarterly report. Contrarian Fool Jim Mueller bought shares at the new, lower prices on the theory that the business isn't broken -- just the stock.

MF Global actually takes the cake by falling from $9.28 to $0.99 per share -- an 837% value span in fewer than 10 months. And the worst is yet to come, because the stock is already totally worthless even if gamblers continue to trade it.

Some of these stocks are going up; others way down. The motivations behind the moves range from obvious to ridiculous.

What they all have in common is drastic changes in the value of their businesses -- sometimes real and sometimes perceived. In a completely rational market where every investor had a complete set of correct business information, these sudden swings wouldn't exist. But we don't, so they do. And these crazy swings create both pains and gains along the way. Don't forget your seat belt.

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Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Dendreon. Motley Fool newsletter services have recommended buying shares of Travelzoo and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


Read/Post Comments (12) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 01, 2011, at 5:12 PM, TMFZahrim wrote:

    Please elaborate, Steve.

    Anders

  • Report this Comment On November 01, 2011, at 7:56 PM, StopTheMadness wrote:

    So, Anders... what is your disclaimer? Are you buying NFLX still? LMFAO. Didn't you mean to say "substantially all the assets"? Maybe a 'crazed gambler' can answer that?

    "That's right -- you, the common shareholder, get nothing."

    So what about the 2012s and the 2014s for Blockbuster? You fail to mention them in your infinite wisdom slAnders.

    They pay you for this stuff? ...outlandish. All I have to say is "Stop The Madness" slAnders.

  • Report this Comment On November 01, 2011, at 9:50 PM, TMFZahrim wrote:

    http://www.kccllc.net/blockbuster

    "As a result of the Asset Sale, the Debtors have no further business operations nor assets to liquidate. DISH is the current owner of the “Blockbuster” brand, inclusive of its ongoing retail, internet, and by-mail distribution channels. It is the Debtors’ understanding that such ongoing business operations are being managed by Blockbuster L.L.C. (“New Blockbuster”), which is an affiliate of DISH, a non-debtor entity and in no way related to or affiliated with the Debtors. Accordingly, all inquiries concerning the ongoing business of New Blockbuster should be directed to DISH and the operations of New Blockbuster will have no impact on the recoveries anticipated in these chapter 11 cases for either creditors or equity interest holders of the Debtors."

    With no further assets nor business operations, how can there be any value in that empty paper? Here, have another dose:

    "Debtors continue to remind investors of their strong belief that there will be no value for the common stockholders of Parent in the bankruptcy liquidation process of the Debtors, even under the most optimistic of scenarios. ... Once the Debtors conclude their wind down efforts, the Debtors anticipate seeking dissolution of their corporate existence and canceling the shares of any common and preferred stock issued by the Parent."

    Anders

  • Report this Comment On November 01, 2011, at 10:10 PM, rodnog wrote:

    Anders, i think you've made some PINK:BLOAQ pumpers/bagholders mad...

  • Report this Comment On November 01, 2011, at 11:19 PM, watchwise wrote:

    Anders,

    Have you finally figured out the difference between a debtor and a creditor? Your superficial analysis is mind-boggling. Do you actually receive payment for this stuff?

  • Report this Comment On November 02, 2011, at 10:27 AM, gmaggipinto wrote:

    Anders Bylund is one of the most corrupt writers working for any publication.

    In the summer of 2010 he was so broke he needed to sell $240 worth of stock.

    just months later he began slamming Bloaq shares at 4 cents, and miraculously his finances improved.

    This is the third time he's put out a negative piece on bliaq/bloaq since 9/23/10...each time has been accompanied by an accumulation of the shares by the folks sponsoring the story, and a run up in price.

    His stock of the day pick on NFLX, 7/8/11 citing their intl business prospects at $295 speaks for itself.

  • Report this Comment On November 02, 2011, at 10:37 AM, gmaggipinto wrote:

    Working for hedge fund sponsors you'd be amazed at what Anders puts in print.'

    Why he's the only one I know who said buy NFLX at $295 on its way to $75

    Said buy BBI at $4 when Icahn Capital was long

    Said sell at .04 before the stock printed 10 times that number.

    Gee, you think one of the funds paying Bylund to write these stories might see some value in the shell Anders just said was wrothless ?

    after all, Bylund forgot to address the tax loss carry forwards, and the fact that Icahn capital would never let Dish prosper in BBI, at their expense.

    Remember, the same guys acquiring the shares when Anders says sell, had the SEC halt trading in the stock bec/ the Dish news was so bullish for Bloaq that people were getting confused.

    Think Icahn was stupid enough to let Dish win ?

    With Anders Bylund, the great contrarian indicator paid to write Icahn Capital stories, you can bet Icahn knows all about the tax losses and how to make them pay off in his asset sale arrangement with Dish.

  • Report this Comment On November 02, 2011, at 11:03 AM, ever8 wrote:

    Hi Anders, thanks for highlight the writing on the wall. However I have a question, in spite of all the saying that BLIAQ is a doomed company and so and so...my question is this: Is not the "PINK:BLIAQ" a totally an new entity like any other new startups or a penny stocks, even though the stigma of bankruptcy of the original blockbuster is still attached to it (I think it should not)? What if will all the millions of transactions, the company decided one day to start an online video streaming service in one of the developing countries?

  • Report this Comment On November 02, 2011, at 11:22 AM, gmaggipinto wrote:

    Doesn't it seem like what happens to a shell of a company that averaged $200 mil in annual ebitda, with big cost cutting benefits about to be realized, still generating well over $2 billion in total revenue with 57% gross margins, is an odd subject for Anders to cover ?

    After all, he has no tax background at all...Since the biggest remaining shareholder asset not sold was the tax losses, perhaps Anders can address how those might come back in play..if for example, Icahn Capital is not stupid.

    Anders can you address the tax loss question for the readers you're trying to con, working as you are on behalf of the hedge funds who sponsored this latest sell bloaq/bliaq story ?

  • Report this Comment On November 02, 2011, at 12:06 PM, gmaggipinto wrote:

    Bylund's sponsors aren't here to answer those NOL questions about Icahn capital's end game for the shares Bylund keeps trying to get retail holders to sell.

    But what if Icahn capital is not stupid, and instead of letting Dish out bid them by $1 mil for the assets, (when Dish allegedly paid $320 mil for a debt free BBI generating a 3yr avg of $200 mil in ebitda, with a world wide valuable brand name garnering some 4% of BBI's revenues for the use there-of) Dish and Icahn capital, reached an agreement about what Dish would buy, and what Icahn capital would buy back from them, to collectively get the best joint price for the assets.

    And what if Dish were to garner royalty payments from BBI, for use of the brand name Dish wants to use for their offerings.

    Might Icahn have the capital to buy back those assets Dish does not want, while offering them a royalty payment for brand use, to preserve the company in the very corporate shell in which the hedge fund sponsored Bylund has gone out of his way to try and drum up stock sales.

    Anders

    Maybe you can address the possibility that if NFLX founder Reid Hastings said the BBI brand name was worth what Dish paid for all of BBI, that perhaps the BBI shell you claim is worthless, has substantial upside should Icahn, as lead debt holder dictating the BK process, not be stupid.

  • Report this Comment On November 02, 2011, at 3:58 PM, TMFZahrim wrote:

    @ever8, BLIAQ is actually the old BLOAQ, only under a new ticker symbol. If you held BLOAQ shares, they have now been converted into BLIAQ.

    If Blockbuster makes any money from here on out, in any market and any use of the brand name, that cash belongs to DISH Networks. BLIAQ has no assets (including no tax loss carryforwards) and no business operations, and literally can't do business anymore. People will still trade it though -- as an example, Circuit City shares still changed hands 18 months after the bankruptcy, but are now null and void. Linens N' Things dies much faster. Borders Group has closed every store but you can still buy the stock. Please don't, if you have any sense.

    Anders

  • Report this Comment On November 02, 2011, at 4:15 PM, myboynick wrote:

    u receive $60 per article or so and call urself an expert in technology investing. what a joke. btw, VHC invented 4g security. enjoy the crash and burn.

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