It's hard to let go, particularly if you don't see your mission as having been accomplished. Earlier this month, Best Buy
An inconvenient truth
The problems at Best Buy are legion. In addition to the scandal, the electronics superstore is waging a losing battle against Amazon.com
There are operational issues as well that have served to alienate customers, such as the well-publicized snafu last Christmas in which Best Buy cancelled orders that had been placed well before the shipping deadline and reneged on deals it had made.
And there's been no guarantee of success for its rivals that have been unable to capitalize on its mistakes. hhgregg, for instance, finds its shares down 25% year to date as fiscal 2012 adjusted profits fell 2.5%. Conn's
A gated community
Current management is operating under some sort of bunker mentality these days. Perhaps sensing that Schulze might make such a move, the board increased to 25% from 10% the minimum threshold of ownership required for a shareholder to call a special meeting to force a change of control. Schulze is Best Buy's biggest shareholder, but his stake is just 20%, so the new level is noteworthy. The company is also paying its executives lucrative bonuses to stay put: Four executive VPs got $500,000 plus $2 million in stock if they'd continue working.
It's reported that Schulze believes Best Buy needs some dramatic changes if it's going to survive, and doing it out of the glare of the public market's klieg lights is often the preferred means of achieving it. But analysts don't see a buyout as an easily achieved end, since Schulze owns only about $1.4 billion worth of stock and would probably need to bring in investors willing to pony up another $2.6 billion before financing the rest with debt, for a total bill that could easily run upwards of $7 billion.
Past is prologue
Rather than heralding a period of ascendancy, the bankruptcy of Circuit City may in fact have been ushering in what was to become of Best Buy's future. The big-box retailing concept is dying, and retailers such as office-supplies giant Staples
Indeed, The Shack is going for the ultimate small floor plan, opting to open store-within-a-store kiosks. Best Buy doesn't have that option, as it's difficult to sell a flat-screen TV set at a kiosk.
In the end, Schulze may not be able to regain control of the company he created, at which point he'd probably try to sell his shares. Of course, such a move would probably crush the price, since anyone buying them would get a discount.
A no-win situation
Current shareholders are stuck. The competitive landscape looks too rough-and-tumble to effectively operate in; the management that presided over the collapse remains entrenched; and a stock sale by the founder would decimate its price for those remaining around. Even the going-private deal offers no hope of a significant premium. There doesn't seem any way out of the morass except in betting against it.
As a longtime shareholder myself, I may ultimately find that the best way to gain control of the situation is by letting go ... of my stock.
Box it up!
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