Circuit City (CC) is sticking to its guns. The Richmond, Va., electronics retailer reiterated Wednesday afternoon that it doesn’t plan to open its books to Blockbuster (BBI), the movie rental chain that has proposed to buy Circuit City for $6 or more a share. Circuit City said it won’t offer any further information to Blockbuster till Blockbuster shows it can pay for the deal.

The comments come in response to a letter released Wednesday by dissident Circuit City shareholder Mark Wattles, whose Wattles Capital Management seeks to throw out the Circuit City board. Wattles urged Circuit City to give Blockbuster access to due diligence information and start serious talks. While Circuit City has focused on Blockbuster’s apparent reliance on a dilutive rights issue to finance the transaction, Wattles noted that Blockbuster may have access to financing from sources such as big shareholder Carl Icahn. He also said giving Blockbuster the data poses no competitive threat because the companies aren’t in the same business.

Those arguments haven’t stirred Circuit City, however. Circuit City said Wednesday afternoon that its advisers at Goldman Sachs believe Blockbuster won’t be able to raise enough money to make the purchase, with the debt markets reluctant to finance anyone but the highest-quality issuers. “Circuit City awaits a viable financing structure that is predictably executable by Blockbuster, given its current constraints of size and capital structure before it would be appropriate to allow further due diligence,” the company said. Circuit City shares, which traded as high as $5.75 in the wake of Blockbuster’s release last week of its unsolicited proposal, resumed their retreat late Wednesday and traded down 6 cents at $4.52.

Circuit City (CC) is wondering where Blockbuster (BBI) would get the money to buy the electronics retailer. Circuit City shares surged 54% in early trading Monday after Blockbuster said it was willing to pay $6 to $8 a share for the Richmond, Va., company. But Circuit City’s press release promising to consider the proposal raises a good question: where will Blockbuster come up with the money?

Blockbuster’s Feb. 17 letter to Circuit City suggests it plans to finance the deal through a rights offering, a mechanism that allows existing shareholders to buy additional shares of a company - often at a discount. But in Monday’s response, Circuit City appears skeptical that Blockbuster could pull off such an offering. Circuit City notes that the deal “appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price.” Circuit City goes on to point out that rights offerings are rare in the United States and typically occur at a discounted price. Monday morning’s selloff in Blockbuster stock - it dropped 11% to within a dime of its 52-week low - suggests that investors are skeptical as well.

Blockbuster (BBI) has obviously learned a thing or two from big shareholder Carl Icahn. The movie rental company surprised investors Monday by saying it wants to buy Circuit City (CC). Dallas-based Blockbuster said it sent a letter back on Feb. 17 telling Circuit City chief Philip Schoonover of the company’s interest in exploring a possible deal. The news sent Circuit City shares soaring 54% in early action Monday even though Blockbuster said Richmond, Va.-based Circuit City “has failed to provide due diligence necessary to allow Blockbuster to make a definitive proposal.” 

The Circuit City rally comes in part because, in the great Icahn tradition, Blockbuster isn’t taking no for an answer. Instead, it’s putting pressure on its target - which is already under pressure from activist investor Mark Wattles, who is launching a proxy fight - with aggressive statements in the press. “Blockbuster is making its proposal public because it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company,” Blockbuster said. “In addition, as Blockbuster has other strategic opportunities, its offer is conditioned upon timely commencement of the due diligence process.”

It’s not clear what Blockbuster’s other strategic opportunities are, given its competitive struggles against Netflix (NFLX) and the poor environment for retail sales. The company’s shares recently fetched $3.11 each, down from $10 or so when Icahn started throwing his weight around the company back in 2005.  But don’t mention that to CEO Jim Keyes. “Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage,” he says. Noting that Blockbuster is set to swing to a first-quarter profit of $30 million from last year’s $49 million loss, Keyes adds, “These results are a clear demonstration that our strategy is working.” Let’s not get carried away.

Carl Icahn still hasn’t posted anything on his blog, but the billionaire investor is having no trouble getting his message out. Icahn will appear Sunday night on CBS’ “60 Minutes” to discuss his investment victories, according to a press release from the TV network. The interview with Lesley Stahl finds Icahn shrugging off his failure to force a breakup at Time Warner (TWX), publisher of Fortune, in a 2006 showdown with then-CEO Dick Parsons. “It’s a little bit of he who laughs last,” Icahn tells Stahl.  “Maybe I made a mistake, but I made $300 million on it.”

Icahn says he also made $300 million with his recent foray into software company BEA Systems (BEAS), which agreed this year to sell itself to Oracle (ORCL). In that case Icahn appears to have succeeded in spite of himself: BEA held out and got a deal worth $19.38 a share after Icahn scoffed at the company’s decision to reject Oracle’s original offer of $17.

But while Fortune’s Shawn Tully last year dubbed Icahn the shrewdest investor on the planet, it’s clear that recently some of his bets haven’t gone as planned. Motorola (MOT), the struggling handset maker that Icahn recently boosted his stake in, is down sharply since he began building his position in 2007, and Blockbuster (BBI) continues to struggle despite Icahn’s success in booting former chief John Antioco. J.C. Penney (JCP), reportedly another big Icahn holding, dropped 10% Thursday after its latest weak same-store sales performance. It remains to be seen who will laugh last on those picks.

Netflix (NFLX) has had a nice run, but it won’t last. This week the mail order DVD company got some bad news when the Financial Times reported that Apple (AAPL) is joining up with News Corp.’s (NWS) Fox to rent out digital movie downloads through the iTunes service. Given how Apple changed the digital music racket, it’s only natural to expect the company to make big inroads into the home movie business as well - most likely at the expense of Netflix and its struggling rival Blockbuster (BBI).

That’s very much Rick Aristotle Munarriz’ take at the Motley Fool. Munarriz, who owns Netflix stock, points out that Amazon (AMZN) has been doing digital downloads since last year. So even with Wal-Mart (WMT) dropping out of the digital download business, Netflix and Blockbuster face the prospect of rising competition and falling prices. That’s bad news for shareholders in Netflix, whose shares have jumped 59 percent off their September lows after the company survived an earlier price war.

The verdict isn’t unanimous. At TheStreet.com, Kevin Kelleher conjectures that Netflix seems to be having a good holiday season. But as Munarriz argued back in July, Netflix may have missed its best chance to counter the likes of Apple and Amazon when it failed to move forward on a digital movie-delivery partnership with Tivo (TIVO). “In short, tomorrow is coming anyway,” he wrote this week of the Apple-Fox linkup, “but now it may be coming a little sooner than expected.” That’s too soon for comfort for Netflix fans.