Blockbuster Falling on Reverse Split News

NEW YORK ( TheStreet -- Blockbuster ( BBI) is tanking after it announced on Monday that it is looking for shareholders to vote on a reverse stock split at its annual meeting on May 26.

At the annual meeting, shareholders will be able to vote on combining Class A and Class B common shares as well.

Blockbuster also reported on Monday that it's been notified by the New York Stock Exchange that its average market capitalization fell below $75 million in the 30-day trading period. The company has 45 days to regain listing compliance.

"We intend to promptly submit a plan to the NYSE, which will outline the proactive steps we plan to take to remedy the company's noncompliance by September of 2011," CEO Jim Keyes said in a statement.

There are few things investors dislike more than a reverse stock split, and as a result shares are plunging 6.1% to 26 cents in pre-market trading. A reverse stock split reduces the number of shares a company (and its investors) has outstanding, which artificially increases the value of the stock or earnings per share.

The only thing more worrisome for Blockbuster than a reverse stock split is the perpetuating fears of bankruptcy. Blockbuster warned earlier this month that may have to resort to a Chapter 11 filing if cash levels remain weak.

-- Reported by Jeanine Poggi in New York.

Follow TheStreet.com on Twitter and become a fan on Facebook.

More from Stocks

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says