Blockbuster Disclosure Angst:Lenders or Investors

Blockbuster (BBI) announced results which may have some cause for encouragement; but they cannot yet say they have concluded negotiations with lenders to extend their credit facility. This may impact the auditor’s ability to give them the critical going concern opinion. Blockbuster senior executives all sounded very positive and insisted that the company is a cash machine and is well positioned for the future.

The problem with the disclosure program is that the most important financial partner i.e. the lenders are not in the room. But if they hear a frank discussion among equity investors about risks and rewards in the business they may become spooked and not extend the facility or ask for more onerous modifications.

So the next question investors have to ask is “Was management as forthcoming as you would normally expect?” Conflicting agenda’s. Damned if you do damned if you don’t.

And then you have to wonder about competing technologies and truly consider if you want to go all the way to a retail outlet to pick up a movie when your teenagers know how to download almost anything they want.