Circuit City: Indecision & Capital Misallocation

Circuit City had the cash, the assets, and the opportunity to fix its store base. It chose to buy back stock instead.

Circuit City was still well-positioned with respectable market share, a profitable business, attractive assets to sell, and cash in the bank. With a new CEO in 2000, it was time to decide what it wanted to be. The stores needed $2.1 billion in work. Instead, the Company bought back $996 million in stock and spun off CarMax tax-free.