Video firm stock rises after rival buys stake

Blockbuster Inc. shares rose 17% after the founder of the Hollywood Video chain took a 5.7% equity stake in the world’s biggest video-rental chain and expressed confidence that the Dallas company could meet its obligations.

Wattles Capital Management acquired 4.84 million shares of Blockbuster, while HKW Trust, which Mark Wattles controls, bought 2 million, according to a regulatory filing Monday. Blockbuster shares, which declined 68% last year, jumped 11 cents to 76 cents.

Blockbuster, which has faced increased competition from mail-order company Netflix Inc., said this month that it hired law firm Kirkland & Ellis for advice on refinancing and raising capital and that it didn’t intend to file for bankruptcy protection. The company has said it plans to fund operations through the end of 2009 after two credit lines expire in August.

Wattles, who founded the Hollywood Video chain and sold it in 2005, said investors were “overly concerned” about Blockbuster’s financial stability. In the filing, he said he “fully supports” management.

Blockbuster said in November that it could remodel fewer stores and curtail advertising and labor expenses if conditions worsened. It also said it could close stores if necessary.