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DALLAS, Texas (November 17, 2005) – The law firm of Baron & Budd, P.C. announces that a class action lawsuit has been filed on behalf of purchasers of all those who acquired shares of Blockbuster, Inc. ("Blockbuster" or the "Company") (NYSE:BBI – News) pursuant to the Company's exchange offer of Viacom, Inc. ("Viacom") stock for 144 million common shares of Blockbuster (the "Exchange Offer"), and on behalf of those who purchased Blockbuster shares in the open market between September 8, 2004 and August 9, 2005, inclusive (the "Class Period"). The lawsuit seeks to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). The suit was filed in the United States District Court for the Northern District of Texas and is pending before the Honorable David C. Godbey against defendants Blockbuster, Viacom, National Amusements, Inc. and certain of Viacom and Blockbuster's officers and directors.
The complaint alleges that Viacom was Blockbuster's controlling shareholder and that prior to the Exchange Offer, Viacom caused Blockbuster to pay a $5 per share special dividend of which Viacom was the primary beneficiary. In order to pay the dividend, Blockbuster was forced to take on debt in the amount of approximately $1.1 billion. As further set forth in the complaint, defendants failed to disclose in the Prospectus and throughout the Class Period that Blockbuster was unprepared to build the technological infrastructure required to integrate its in-store and online sales operations and to achieve the Company's transformation away from being solely a movie rental outlet. Moreover, the Company's core in-store rental operations were not generating sufficient cash flow to fund Blockbuster's attempts to diversify.
The truth began to emerge on August 9, 2005, when, before the market opened, the Company reported: (a) a second-quarter net loss of $57.2 million, or $0.31 per share — well below Company-guided analyst estimates; (b) negative free cash flow of $118 million compared to positive free cash flow of $23 million in the second quarter of 2004; and (c) that it was abandoning its 2005 guidance. The Company also announced that, on August 8, 2005, it had been forced to amend its credit facility to provide for a waiver of its leverage ratio covenants. After this annuncement, the Company's stock opened that morning at $7.05, down 11.9%, or $0.96 from the previous day's closing price of $8.01. The stock continued to decline as the market absorbed the full impact of the announcement, falling to a six-year low of $6.30 on August 10, 2005.
After the Class Period, on November 8, 2005, defendants stated in an SEC filings that Blockbuster "may not have sufficient cash flows from operating activities, cash on hand and available borrowings under our credit facilities to service our indebtedness" and that the Company could be forced into bankruptcy if it was unable to raise additional funds through a private offering.
If you acquired Blockbuster Shares in the Exchange Offer, or purchased Blockbuster shares on the open market between September 8, 2004 and August 9, 2005, and sustained damages, you may, no later than January 9, 2006, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Baron & Budd, P.C., or other counsel of your choice, to serve as your counsel in this action.
If you are a member of this class and would like to take action in this suit, please visit Baron & Budd online at http://www.securitiesactions.com. Information on your legal rights can be obtained by contacting the law firm of Baron & Budd, P.C.
About Baron & Budd, P.C.
Since 1977, the law firm of Baron & Budd, P.C. has championed the rights of people and communities harmed by corporate misconduct. With over 80 attorneys and offices in Texas, Illinois, Ohio, Louisiana, and New York, Baron & Budd enjoys a national reputation as a leader of the plaintiff’s bar. The firm represents individuals with mesothelioma and other diseases caused by asbestos; leukemia and lymphoma caused by benzene; and injuries caused by other toxic substances and pharmaceuticals. The firm also represents water authorities seeking clean-up costs for drinking water contamination; securities investors defrauded by corporate wrongdoing; and consumers. For more information about Baron & Budd, call 1-800-222-2766 or visit www.baronandbudd.com.