Movie Gallery Inc. (NDAQ:MOVI) shares plummeted today after the rental chain finally declared bankruptcy just two and a half years after winning a takeover battle for a major rival. The news comes as no big surprise to shareholders who saw warning signs back in late June.

Movie Gallery filed for Chapter 11 bankruptcy today in hopes that it can slash its debt by $400 million and reorganize itself into a new public entity. The chain still operates nearly 4,500 stores after it acquired Hollywood Video in April 2005 for $1.25 billion and the assumption of $350 million in debt.

Many analysts remain skeptical as to whether or not the company can emerge from bankruptcy and remain a viable competitor in the increasingly difficult rental space. Tight competition from satellite and cable providers along with online rental services like Netflix and Blockbuster's new service. However, Movie Gallery did unveil plans in March to enter the online business.

Movie Gallery also has a lot of restructuring ahead of itself before it can go through with the Chapter 11 process. The company said it would close nearly 520 rental stores two weeks after it said it would miss interest payments on second-lien debt and 9.625% senior notes.

"Although the company has taken numerous steps to reduce its debt and strengthen its balance sheet through closing unprofitable stores, headcount reductions and other means, these actions were not sufficient to offset the significant shift in our business and the cost of our substantial debt obligations," said chief executive Joe Malugen.

In the end, common stock shareholders will likely end up losing all of their investment as shares in the new company will be distributed to creditors. However, the new public entity may be a good investment opportunity if it is priced correctly. Usually, creditors will begin selling their stock immediately and create a discount. Combined, these factors make MOVI a stock worth watching!

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Mace Security International (NDAQ:MACE) finally agreed to expand its board of directors today in order to avoid a proxy fight with a major shareholder, according to a Schedule 13D/A filing with the SEC. Shareholders are hoping that this move will help unlock value in a stock that has remained stagnant during the past few months.

Lawndale Capital Management, which owns 9.6% of the company, indicated in the past that it believes the problems with Mace's board of directors has contributed to the company's poor operating performance and the decline in its stock price. Mace did not respond until recently when it agreed to hold discussions with the hedge fund and expand its board in order to prevent a proxy fight.

According to a joint press release, "The corporate governance enhancements to be adopted are intended to increase the independent composition and functioning of Mace's Board. As a result of the plan, Mace will migrate to a six-person Board, consisting of five Independent directors, three who are not presently on Mace's Board plus two continuing Independent directors."

In the end, this is great news for shareholders. Greater board independence means that more shareholder proposals to unlock value will be considered while compensation and other board-determined things will be kept under control. Combined, these factors make MACE a stock worth watching!

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Billionaire investor Warren Buffet appears to have changed his sentiment on the railroad industry after cutting down his holdings in Union Pacific (NYSE:UNP) and Norfolk (NYSE:NSC). There is no mention of his Santa Fe Corporation (NYSE:BNI), however, which means he may be holding onto that one for now.

Buffet's Berkshire Hathaway (NYSE:BRK) sold 10.5 million shares of Union Pacific bringing his holdings down to 7.41 million shares. Meanwhile, he sold off around 2.6 million shares of Norfolk bringing his stake down to right around 3.75 million shares. These are significant reductions in his exposure to the sector.

Many are speculating that higher energy prices may hit railroads more dramatically than initially expected. The transportation sector is typically the first to be hit and railroads are particularly vulnerable these days considering the plethora of other problems that they are facing.

In the end, Warren Buffet typically knows what he is doing when investing. His moves are definitely worth watching via Berkshire's 13F filings with the SEC. In this case, it may be a time to reduce exposure to railroads and other transportation companies as energy prices continue to rise.