Shareholders Urge Circuit City to Negotiate with Blockbuster

Hedge fund HBK Investments disclosed in a filing with the U.S. Securities and Exchange Commission that it owns a 9.1 percent stake in Circuit City's common stock. HBK also has a 5 percent stake in Blockbuster's Class A shares and an 8 percent share of its Class B stock.

Blockbuster made a hostile takeover bid earlier this month of just over $1 billion for Circuit City Stores Inc. in hopes of creating a huge chain that would sell electronic gadgets and rent movies and games.

HBK said it is disappointed that Circuit City "will not allow a bona fide bidder" to examine its finances.

HBK sent a letter to Circuit City urging its board of directors to also create a competitive bidding process to maximize shareholder value.

"Since the public announcement of Blockbuster's proposal to acquire Circuit City, we have analyzed the indicated transaction extensively and we have concluded that the combination of the two companies would create significant value for all shareholders," it said.

Another regulatory filing on Monday showed that a proxy battle between investor Mark Wattles and electronics retailer Circuit City is imminent.

Mark J. Wattles, owner of the 32-store Ultimate Electronics chain, criticized the Circuit City's turnaround efforts, and blamed CEO Philip Schoonover and asked for him to be replaced.