Flailing tech retailer may be on the verge of a buyout

Circuit City (NYSE: CC, Bullboard) has taken a wild ride over the last two years, and has ended up in a position where part or all of the company may be sold. The stock trades just above $5, down from a 52-week high of almost $18. Much of the drop is due to weak retail sales in many chains caused by a faltering economy. CC has the additional problem that it has larger competitors like Best Buy (NYSE: BBY, Bullboard) and Wal-Mart (NYSE: WMT, Bullboard) , which have more stores and deeper pocket books.

Last month, movie rental chain Blockbuster (NYSE: BBI, Bullboard) offered to buy Circuit City for about $1 billion. Why the deal makes sense for Blockbuster is hard to fathom, but CC shareholders probably don't care if they end up with a high purchase price. Carl Icahn, a large Blockbuster shareholder, will make sure that the rental company has access to cash. On that basis, Circuit City is allowing Blockbuster to look at its books.

Almost everyone wants a piece of a Circuit City buyout, which should be an indication that the stock is worth much more than its current share price. Wattles Capital fought to get three board seats and was able to win the battle. The fund clearly thinks that being "inside" the company will help them push up the firm's value

Circuit City has lost money for the last four quarters. Even when the company was doing well three years ago, profits were modest.

Shareholders may get a buyout. From their standpoint it is the best result possible.

ABOUT THE AUTHOR

From the news desk of 24/7 Wall St.

This report was prepared by 24/7 Wall St., LLC exclusively for Stockhouse.

Stockhouse Conflict and Disclosure Policy:

Stockhouse publishing Ltd., owners and operators of Stockhouse.com, has established the following rules to ensure that there is no appearance of impropriety on the part of any Stockhouse Editorial writers ("Writers"). The content of Stockhouse Editorial articles (the "Articles") are the opinion of the Writer and any reliance on the content of these articles is at your sole risk. Our Writers are not registered investment advisors. You should not make any kind of investment decision in relation to Articles or stocks discussed in them without obtaining advice from a registered investment advisor.

Facts relied upon by our Writers are generally provided by the subject companies or gathered by our Writers from other public and/or private sources. These facts may be in error and if so, the opinions of our Writers may be materially different.

Writers may own, buy, or sell shares in public companies mentioned in their Articles, but in the Article they must prominently state their ownership position. Thus, a conflict may exist. Writers are not permitted to write Articles that attempt to benefit persons connected to the Writer, such as family or friends, except where disclosure is made in the same way as if the Writer him/herself owns stock.

Writers cannot solicit, accept, or agree to receive anything of value given or paid with the intent of influencing their Articles.

Stockhouse notifies each Writer about these rules, and we rely on the integrity of our Writers to ensure that our rules are followed.