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Between a delisting from the NYSE, penny-stock values and now Chapter 11, it has not been a good year to be a Blockbuster shareholder. Things are even worse, according to disgruntled shareholder Jasbir Sandhu, who is alleging that BB CEO Jim Keyes and billionaire investor Carl Icahn engaged in collusion prior to Blockbuster’s bankruptcy filing last month.

Sandhu filed a complaint recently with a US Bankruptcy Court calling for a formal inquiry by the SEC, claiming that “Keyes and Icahn worked together to thwart recapitalization efforts and increase Icahn’s return on investment by dragging the price of the bond (debt) lower.”

Sandhu believes that Keyes and his co-conspirator Icahn deliberately lowered BB’s portfolio value by witholding certain company assets from the bankruptcy. Said Sandhu

“Selling a few international assets would have avoided Chapter 11, but Keyes followed the path that was more favorable to Carl Icahn . . . Our objective is to get full disclosure from Blockbuster about the recapitalization efforts and Carl Icahn’s influence,”

Wedbush Morgan analyst Michael Pachter dismissed Sandu’s allegations with the following:

“It’s sour grapes . . . Neither of them is a bad guy. It’s a lame allegation.”

Sandhu’s complaint defies reports that Icahn and Keyes are not particularly friendly, which makes their alleged collusion seem less likely. Is Sandhu way off, or do you think there’s some truth in his accusations? Hit the comments and tell us what you think.

(via Home Media Magazine)

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