HARTFORD, Conn., Nov. 10, 2005 (PRIMEZONE) -- The law firm of Schatz & Nobel, P.C., which has significant experience representing investors in prosecuting claims of securities fraud, announces that a lawsuit seeking class action status has been filed in the United States District Court for the Northern District of Texas on behalf of all persons who acquired the publicly traded securities of Blockbuster, Inc. (NYSE:BBI) 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 Complaint alleges that defendants violated federal securities laws by issuing a series of materially false statements. It is alleged that Viacom caused Blockbuster to pay a 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. In the Prospectus issued in connection with Viacom's divestiture of its Blockbuster shares (the "Prospectus"), defendants stated that Blockbuster planned to transform itself through a series of initiatives and that Blockbuster's debt obligations would not impede its transformation.
Unbeknownst to investors, Blockbuster was wholly unprepared to build the technological infrastructure required to integrate its in-store and online sales operations and otherwise execute the Company's transformation. Moreover, the Company's core in-store rental operations were not generating sufficient cash flow. On August 9, 2005, Blockbuster reported: (i) a second-quarter net loss of $57.2 million, or $0.31 per share; (ii) negative free cash flow of $118 million compared to positive free cash flow of $23 million in the second quarter of 2004; and (iii) that it was abandoning its 2005 guidance. Blockbuster 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.
If you are a member of the class, you may, no later than January 9, 2006, request that the Court appoint you as lead plaintiff of the class. A lead plaintiff is a class member that acts on behalf of other class members in directing the litigation. Although your ability to share in any recovery is not affected by the decision whether or not to seek appointment as a lead plaintiff, lead plaintiffs make important decisions which could affect the overall recovery for class members, including decisions concerning settlement. The securities laws require the Court to consider the class member(s) with the largest financial interest as presumptively the most adequate lead plaintiff(s).
While Schatz & Nobel has not filed a lawsuit against the defendants, to view a copy of the Complaint initiating the class action or for more information about the case, class action cases in general, and your rights, please contact Schatz & Nobel toll-free at (800) 797-5499, or by e-mail at sn06106@aol.com, or visit our website: www.snlaw.net.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca