Many of you may recall my negative piece on Blockbuster (BBI) back in August. At the time the stock was $7 and looked pricey given an extremely competitive business environment and a horrendous balance sheet.

While I still believe video-on-demand is the future, and online DVD rental services are not the answer to BBI's profit woes, the stock's swoon to $3.85 as of today's close signals to me that much, if not all, of the bad news has now been fully priced in.

While a turnaround will not be easy, the company's stores clearly have some value. Blockbuster's creditors have been very lenient with respect to possible violations of debt covenants, so bankruptcy in the short-term does not appear to be an issue.

Would I go long now that the stock has dropped 45 percent and could rebound to a decent level? It's not at the top of my list by any means, as there are many better, safer values to be had.

That said, most of the bad news seems to have played out, so short sellers may be wise to take their hefty profit and move on to something else.