BB Liquidating Inc. (BLIAQ)

[fredman]

This Stock Is Going to Zero, and You Know It

You may have seen fellow Fool Chuck Saletta explaining why Motors Liquidation Company carries absolutely no value for investors, even if you ask the company's own management: "As its name implies, the liquidation company is being shepherded through bankruptcy liquidation, and its shares are completely worthless. To be clear: Its fair value is $0.00, not a penny more."

Now former movie night maven Blockbuster (OTC BB: BLOKA.PK) is in the same position. Blockbuster has filed for bankruptcy protection. The company is up to its eyeballs in debt; the bankruptcy plan will reduce $1 billion of senior debt to less than $100 million but also gives Blockbuster's equity to the firms issuing the debt to begin with. The market cap, for comparison purposes, stands at about $12 million today. That's about $12 million too high. Blockbuster's own press release will tell you so: "Under the proposed plan, there would be no recovery by the holders of the Company's outstanding subordinated debt, preferred stock or common stock."

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

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 Blockbuster 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.

If anybody could do it, I would have put my money on 7-Eleven savior Jim Keyes; nobody knows retail like this man, after all. But Keyes has tried and failed at making Blockbuster relevant to consumers in the age of digital streams from Netflix (Nasdaq: NFLX) and super-convenient Redbox rental machines by Coinstar (Nasdaq: CSTR). Attempts to copy the Netflix model have failed, and the bricks-and-mortar stores aren't pulling their weight anymore. The jury is still out on Blockbuster's new Redbox-style vending machines, but if that's Blockbuster's saving grace, it won't deliver until the coming Chapter 11 reorganization is but a distant memory.

Crazy, but it's true
Yet people still trade Blockbuster stock in spite of all the risks with absolutely no upside. 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 penny is a 12.5% move when you're starting from $0.08 per share. But even those hustlers will be left holding an empty bag when the bankruptcy filing comes.

To quote Chuck again, there's really only one logical explanation for this madness: "The market is nuts."

Source: http://www.fool.com/investing/general/2010/09/23/this-stock-is-going-to-zero-and-you-know-it.aspx