Just six months after Blockbuster made its ridiculous offer to buyout Circuit City (CC) for 1.35 billion, now Circuit City is filing for bankrupcy.

First off, what does this tell you about Blockbuster's management.  Everyone involved, including Carl Icahn, now have egg in their face.  Although they ultimately did not pull the trigger on the buyout, it was still the journalists, analysts, stockholders and observers who altogether gasped at that news before Blockbuster's management blinked.

Meanwhile, while one company's reputation falls, another one rises.  Best Buy (BBY) is the big winner in all this.  Circuit City was already closing many stores.  Now they will have to close more or sell out giving up further market share to Best Buy, the undisputed champion of this space.  Who are the losers?  The shareholders, of course.

One of the biggest shareholders is Los Angeles based First Pacific Advisors, LLC with over twelve million shares according to their latest filing.  Circuit City's creditors are also in trouble with all this and will likely have to be more conservative with future deals.

The economy is in a downward spiral and this is moreso a reminder that the troubled players are in the biggest trouble.  Circuit City's troubles should have become apparent to all of us when they rejected Blockbuster's bid, knowing full well that when they opened up their books for inspection, what they would have revealed was a disaster waiting to happen.  Yet, shareholders hung on.

In this scary market, it's time to pay close attention!  Circuit City did not necessarily reject the bid because it was too low.  They rejected it because they did not believe Blockbuster would follow through.  And we should have figured out why.  Now we know why.