The party's over, so why won't Carl Icahn go home?

Icahn, the single largest individual shareholder in the video rental chain

Blockbuster

(BBI) - Get Report

, recently reported a 10.84% stake in rival

Hollywood Entertainment

(HLYW)

, at a time when this merger drama seemed over.

Last week, Blockbuster let its hostile bid for Hollywood Entertainment expire, paving the way for the company to merge with No. 3 rental chain

Movie Gallery

(MOVI)

. Alabama-based Movie Gallery has offered $13.25 in cash for each share of Hollywood.

Ichan's latest move to buy Hollywood stock, at $13.15 per share, surprised analysts tracking the merger. Until now, the legendary investor had been avidly supporting Blockbuster's bid for Hollywood. His filing with the

Securities and Exchange Commission

on Thursday stated that he had bought the shares for "investment purposes."

Since the Movie Gallery offer is cash, Icahn stands to see no long-term equity participation in the merger, and he would only be looking at an arbitrage spread of about 10 cents a share. Not exactly the windfall the former corporate raider is famous for.

Experts say at least two other possible motives exist. Icahn either expects that the bid for Hollywood may increase, or he hopes to garner enough support within Hollywood to change the terms or block the deal.

Marc Weitzen, the general counsel for Icahn Associates, said the company had no comment, "because everything we have to say is already in the filing."

Gordon Kaiser, a partner and expert on mergers and acquisitions at law firm Squire Sanders, said an investor choosing the latter option might seek allies among other shareholders.

Such an investor might "believe the block that they're buying, perhaps together with other unhappy shareholders, will be enough to prohibit the transactions from going forward," Kaiser said.

Michael Pachter, an analyst with Wedbush Morgan, noted that Movie Gallery has been firm about not raising its offer for Hollywood, but Ichan may be hoping to get it to change its mind.

"He may talk to Movie Gallery, and they may pay a little more," says Pachter, adding that Icahn is one of the five people who can pull off something like this.

Alternately, Icahn could, possibly along with former Hollywood chief executive Mark Wattles, try to take the company private. For that, however, he would need to have a larger concentration of ownership, says Pachter.

Wattles, who resigned as the chairman and CEO of Hollywood in February, on March 21 proposed to buy 50% of Hollywood's stores, in order to make the Federal Trade Commission more favorable toward Blockbuster's takeover of Hollywood. The FTC ultimately indicated it would block a Blockbuster takeover of Hollywood.

Wattles said in the SEC filing, "In the future, Mr. Wattles may have further discussions with the Company, Blockbuster, Carl Icahn or others regarding a transaction with respect to the Company or some portion of its stores."

Ichan holds more than 9% stake in Blockbuster.