July 2 (Bloomberg) -- Circuit City Stores Inc. dropped to the lowest in more than 17 years in New York trading after Blockbuster Inc. abandoned its $1.35 billion offer for the money-losing electronics retailer.

Circuit City fell 23 cents, or 9 percent, to $2.32 at 4:15 p.m. in New York Stock Exchange composite trading, the lowest since February 1991. That values Richmond, Virginia-based Circuit City at $391 million, less than a third of what Blockbuster said it might pay in April.

``Based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City,'' Chief Executive Officer Jim Keyes said yesterday in a statement.

Blockbuster, based in Dallas, approached the electronics retailer in February with an unsolicited bid of $6 to $8 a share, pending a review of its books. Circuit City, which has lost money for the past two years, agreed to the examination after billionaire investor Carl Icahn said he would step in if Blockbuster couldn't obtain financing.

Circuit City, which has lost 85 percent of its stock market value in 12 months, may now be more attractive to another company or a buyout firm because a shrinking number of bidders probably means a lower asking price. Investor Mark Wattles said June 24 that Circuit City drew interest from at least two companies other than Blockbuster, as well as ``a ton'' of buyout firms.

Big Investor

Wattles, who owns 6.5 percent of Circuit City shares, has been seeking a buyer for the retailer. He gave up a proxy fight and a push for new management after Circuit City agreed to support three of his director nominees. They were elected last week.

The retailer ``certainly could be in play,'' Arvind Bhatia, an analyst at Sterne, Agee & Leach, said in a telephone interview.

Blockbuster, which fell 20 percent after it unveiled its offer April 14 before today, gained 14 cents, or 5.6 percent, to $2.65, giving it a market value of $486 million.

Circuit City's exploration of strategic alternatives is ``an active and ongoing process'' and not dependent on Blockbuster's participation, spokesman Bill Cimino said in a telephone interview. A message left for Icahn after normal business hours yesterday wasn't returned.

More Losses

The chain has posted losses in six of the past seven quarters, and sales have dropped five quarters in a row.

Cash and short-term investments fell 75 percent in the three months that ended May 31, signaling Chief Executive Officer Phil Schoonover's attempt to stem market-share losses to Best Buy Co., his former employer, and Wal-Mart Stores Inc. hasn't worked.

Circuit City is opening increasingly smaller stores and fired higher paid employees to reduce costs.

Bhatia wrote in a June 20 research note that Blockbuster was more likely to lower its bid or scrap it altogether than formally offer $6 a share.

Blockbuster has more than 7,700 stores worldwide. Circuit City has 696 U.S. stores that accounted for 94 percent of its revenue last year. The company has been trying to sell 775 outlets in Canada since last year.

To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net

Last Updated: July 2, 2008 17:25 EDT