Rival Movie Gallery (MOVI) Falls Apart As Blockbuster (BBI) Gets New CEO

The day started well enough for the bricks-and-mortar movie rental companies. Blockbuster (BBI) hired a new CEO and its shares jumped 3.5% to $4.46, but still down from over $9 two years ago.

Then, as the market closed, Movie Gallery (MOVI), the second largest player in the industry, said its second quarter had been "soft" and it would be in default over terms of its senior credit facility. The company is down to a cash balance of about $50 million.

Movie Gallery must now look to renegotiated terms with its lenders, which are unlikely to be favorable, or a sales of the company, which could wipe out common shareholders.

All of the news sent the company’s shares down 60% after hours to $.77. The stock’s 52-week high was $6.78. (Oddly, the MOVI shares appear to have taken a sharp drop about 20 minutes before the close, and then recovered slightly.)

Quite a welcome mat for the new guy over at Blockbuster.

Douglas A. McIntyre can be reached at [email protected].