NEW YORK ( TheStreet) -- Carl Icahn made a big bet when, as reports claim, he invested in one-third of Blockbuster's (BLOKA.PK) debt. But what exactly does Icahn hope to gain from the once video giant gone bankrupt?
The big bet is that Blockbuster will be able to emerge from bankruptcy with nearly no debt and a significantly smaller store base, a more profitable company. And if Blockbuster can stay afloat and keep shuttering locations every year to drive cash flow, Icahn could make out nicely, Wedbush analyst Michael Pachter says.
The hope for Blockbuster is that by closing some locations, it will direct traffic to other stores. This will lower the company's operating expenses since Blockbuster won't have rent expenses, payroll or utilities for those locales.
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