One week ago today I received an e-mail from a "large stockholder" in Blockbuster -- a gentleman high on the movie-studio food chain, as a matter of fact. He copied me on a missive he sent to the Securities and Exchange Commission in which he asked what in the wide, wide world of sports he could do about the fact that his stock, already worth pennies on the dollar, was now valued at next to nothing following the New York Stock Exchange's decision to delist the stock one day earlier.
This shareholder brought up something that remains a mystery at the moment: At its June 24 annual shareholders meeting at Renaissance Tower, and in a press release issued shortly thereafter, Blockbuster said its shareholders had voted "overwhelmingly" to OK a reverse stock split that would collapse its Class A and Class B stock into one. Only, not so much: A week ago Wednesday, after the market closed, Blockbuster filed with the SEC an oopsie-daisy that said the measure had, in fact, failed.
"We need someone at the SEC to reach out to Blockbuster and acknowledge the situation and allow them to hold an emergency re-vote on the issue," wrote this shareholder to the SEC last week. "We need help with the NYSE to put a hold on the delisting until that vote can happen." Too late: Blockbuster's stock is currently trading over the counter at around 15 cents.
Enter: Harry Niko Celentano of the Bronx. He's now the de factor leader of some 172 shareholders who possess more than 11.02 percent of all voting shares and who are demanding an emergency meeting of Blockbuster's shareholders. Pronto.
All of the sudden, Celentano has become the frontman for a band of disgruntled shareholders: He sent Keyes a letter yesterday (it's below) and has been reaching out to the media in order to pressure Blockbuster into holding an emergency meeting.
He tells Unfair Park today that he wants a revote -- "it's the right thing to do. But my experience with Blockbuster is they don't always do the right thing."
His major complaint stems from a press release Blockbuster issued on June 22, in which the video- and game-rental company said it had reached an agreement with the NYSE, confidential, to keep the stock listed till at least September 2011, despite the fact it hadn't seen $1 in value in months. Says Celentano, a number of shareholders with whom he's spoken said they didn't vote for the reverse stock split because, well, they didn't think they needed to anymore -- not with the agreement with the NYSE guaranteeing a listing till September 2011.
"And then, when they said it overwhelmingly passed and then it didn't seven days later, that blew my mind," he says. "It took seven days to count the vote? Something's going on there. Believe me, I did not take seven days to count the vote. And then they file with the SEC after the markets close? And there's no comment on what happened -- how it went from 'overwhelmingly' to 'we made a mistake.'"
As it turns out, the shareholder from whom I heard last week is indeed among the 180-plus now in league with Celentano. Says my shareholder, they all met up on a Yahoo! message board devoted entirely to Blockbuster. Indeed, the board is now filling up with messages of support for the Bronx bomber.
I've got calls into Blockbuster about Celentano's demand for an emergency meeting. Rod McDonald, Blockbuster secretary and general counsel, did tell Maria Halkias that "we just received the letter, we are considering it and we are preparing a response that will be forthcoming soon. In the meantime, we cannot comment further."
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SHOW ME HOW
Below you'll find, first, a time line of events provided by Celentano leading up to his missive. Below that, his letter to Keyes.
June 24th -- Annual Shareholders Meeting
June 28th -- Kellie Nugent (Director of Investor Relations) states that "paperwork has been filed to the NYSE and the SEC regarding A/B conversion and it is set to combine in 7-10 days" ( I did not speak to her, but i will give you the name of the shareholder who did)
June 30th- After market close, with NO PR from the company explaining anything, an SEC filing was made by the company stating that the A/B conversion and the reverse stock split did not pass after all.
July 1st -- Trading is halted for Blockbuster stocks (both classes) at 10.30am EST. No explanation was given at the time by the NYSE or the company.
July 7th- Shares of both A and B class are delisted from the NYSE and begin trading on the pink sheets (OTC)
July 8, 2010
Bronx, NY 10461
James W. Keyes
Blockbuster Chairman of the Board and CEO
1201 Elm Street 21st Floor
Dallas, TX 75270
Dear Mr. Keyes,
My name is Niko Celentano and I am a Blockbuster shareholder from New York. I'm writing this letter to inform you that I have organized a group of over 160 shareholders of Blockbuster class A and B stock. This group consists of owners of 7,578,613 class A shares and 11,742,115 class B shares. Combined we represent 19,320,728 shares and 31,062,843 voting shares. Our voting shares equate to over 10.7% of all voting shares.
The reason for this letter is to inform you of our dissapointment and anger with the recent events that have led to the delisting of both classes of Blockbuster stock from the NYSE. We believe that you, the Board of Directors, and Morrow & Co (the company handling the proxy) are all to blame for the delisting of our shares from the NYSE. We believe the voting was influenced by a press release from the company on June 22nd 2010, just two days before the Annual Shareholders Meeting, stating that "The NYSE has accepted the Company's plan to regain compliance with the NYSE's minimum average market capitalization requirement" and that "With the acceptance of the confidential plan, Blockbuster has until September 2011 to comply with the average market capitalization standard". This has led some to believe that there would be no need for a reverse stock split or A/B conversion.
We also believe there was too much time and effort spent on making sure shareholders voted the "White" proxy card, and not enough effort making sure that shareholders knew of the importance of passing the A/B conversion and reverse stock split measures. We believe that all the press releases from the company trying to make sure Greg Meyer didn't get a board seat would have been better used in making sure all shareholders knew how important their votes were in the upcoming election regarding the reverse stock split and A/B conversion.
We also believe that you, the Board of Directors and Morrow & Co should have explained to shareholders about a new SEC rule that went into effect in January of this year regarding broker voting of non-voted shares. Most of us only found out about this after the two measures above did not receive the amount of votes needed.
We also do not understand why a press release was put out by the company on June 24th, the same day as the Annual Shareholders Meeting, stating that the reverse stock split received enough votes to pass and that the A/B conversion was passed "OVERWHELMINGLY". On June June 28th a shareholder received an email from Kellie Nugent, the Director of Investor Relations at the time, stating that "the paperwork for the A/B conversion had been filed with the SEC and the NYSE and it is set to combine in 7-10 days". We were all suprised on June 30th, almost a week after the meeting, to find out in an SEC filing, after market close, that the reverse stock split and the A/B conversion did not pass. We do not understand why it took the company a week to figure out that we didn't get the votes needed after all.
On July 1st at 10:30am EST, both classes of shares of Blockbuster were halted on the NYSE. We believe a press release should have been put out by the company immediately to inform shareholders of what was going on. We believe the delisting of our shares and the non-conversion of both classes into one class has caused a tremendous loss in shareholder equity. We believe this could have been avoided if the proper measures detailed above were taken.
We are requesting the company schedule an immediate EGM (Emergency General Meeting) and have a new vote on the reverse stock split and A/B conversion. We believe with the information that shareholders have now, that they didn't have before the vote, these measures would pass easily. We are also asking, if and when the new vote passes, for the company to file an appeal with the NYSE to regain listing of our shares.
We hope you will do whatever you can to make sure this is made right. We will be awaiting your response.