Salinas' Inscrutable Circuit City Strategy
Ruthie Ackerman, 11.20.08, 10:25 PM EST
Mexican investor avidly scoops up shares in foundering U.S. retailer.
CIRCUIT CITY STRS
01/13/2009 12:40PM ET$0.22-$0.11-33.33%
1 day3 mo1 yearAdvanced
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BATS Real-Time Market Data by XigniteRicardo Salinas Pliego looks at Circuit City Stores and sees something that others don't. He merrily bought shares in the company as it was spiraling into bankruptcy, building up a 28.1% stake in the ill-fated retailer, which he seems to like.
Salinas is "banking on a great trademark, which is Circuit City," Luis Nino de Rivera, a spokesman for the media conglomerate Grupo Salinas, told the Associated Press this week. "That's a very important name in the retail industry in the United States and it has great value," he said. "There's a great market opportunity here that certainly has to be looked at in detail," Nino de Rivera said.
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Yahoo! BuzzWell, maybe. But Salinas won't be running it anytime soon. In 2006, he reached a settlement on fraud charges with the U.S. Securities and Exchange Commission related to an alleged scheme to conceal related-party deals between a subsidiary of his television company and a private firm he secretly co-owned. He agreed to pay more than $7.0 million to settle the accusations, without admitting or denying guilt. As part of the settlement, he also agreed not to serve as an officer or director of a publicly traded U.S. company for five years, according to an ownership filing with the SEC on Thursday.
Also interesting is the $41.4 million pricetag on the Circuit City shares. Salinas purchased a total of 47.2 million shares, which works out to an average price of 87.7 cents. But the shares haven't traded that high since Sept. 30, and the filing says that some of the purchases were made after the bankruptcy petition on Nov. 11. (See “Final Chapter For Circuit City?”) So Salinas must have bought some of his shares before the end of September and at high prices relative to the 23.5 cents Circuit City (other-otc: CCTYQ - news - people ) currently fetches.
The filing said Salinas, who owns Mexico's TV Azteca (other-otc: TAZTF - news - people ) broadcaster and retailer Elektra , bought the shares “with a view towards possibly seeking influence over the management, business and operations” of Circuit City. “However, no decision in this regard has yet been made,” according to the document.
The filing also said Salinas might acquire additional shares and reserves the right to develop plans or proposals regarding the retailer. It added that he may consider participating in transactions that are part of the Chapter 11 proceeding.
The retailer has said it hopes to emerge from Chapter 11 in the first half of 2009.
Disclaimer: Do not buy or sell based on my recommendation. I am not your financial advisor .My recommendations are based on my intuition, research or both and may be right or wrong.
