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Blockbuster Says Pink Sheets Worthless

Correction: The original version of this article -- published on Sept. 29 -- attributed a quote (found in paragraph 8) to the SEC. The quote was actually from the Blockbuster press release issued on Sept. 29. The updated version of this article clarifies this attribution. A quote appearing in paragraph 6 has been clarified to add attribution to the Blockbuster press release.

NEW YORK (TheStreet) -- Blockbuster's (BLOAQ) pink sheets have been running up in recent weeks, but it seems like investors are finally coming to their senses.

The shell of the movie rental chain, which was purchased out of bankruptcy by Dish Network (DISH) in April, plunged more than 40% this morning, following an investigation by the Securities and Exchange Commission.

The SEC temporarily suspended trading in Blockbuster OTC pink following a filing of a name change of the company to BB Liquidation, due to a "lack of current and accurate information concerning the company's securities due to assertions in third-party press releases to investors concerning, among other things, the company's current financial condition and business prospects."

According to the SEC filing: "The Commission cautions brokers, dealers and prospective purchasers that they should carefully consider the foregoing information along with all currently available information and any information subsequently issued by the company."

As a result of Dish Network's acquisition of Blockbuster, there are no further operations or assets to liquidate.

"None of the publicly owned stocks issued by Parent [BB Liquidating Inc.] prior to the commencement of these chapter 11 cases, including its Class A and Class B common stock, which are currently trading on the OTCQB under the symbols BLOAQ and BLOBQ, respectively, are or will become securities in Dish Network or new Blockbuster, which are independent, non-debtor companies," according to a press release issued on Sept. 29 by Blockbuster.

To put it directly -- there is no value for common shareholders in the bankruptcy liquidation process.

"Even though the Parent's common stock continues to be quoted on the pink sheets, it has no value and Parent's shareholders should not view the trading activity of its common stock on the Pink Sheets or any other market or trading platform as being indicative of the value Parent's shareholders will receive as part of the chapter 11 cases or in connection with any subsequent chapter 7 liquidation," Blockbuster said in the press release issued on Sept. 29.

This is similar to what happened with General Motors (GM) after it filed for bankruptcy in July 2009, but OTC Markets spokeswoman Grace Keith says it is unique in that Blockbuster has been purchased by Dish Network.

According to the press release: "Once the Debtors conclude their wind down efforts, the Debtors anticipate seeking dissolution of their corporate existence and canceling the shares of all common and preferred stock issued by the Parent."

Keith says that she expects BB Liquidators will be removed from OTC Markets within the next week.

The SEC declined to comment further on the reason for the temporary suspension.

-Reported by Jeanine Poggi in New York.

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