The billionaire investor Carl Icahn has slashed his ownership stake in Blockbuster Inc's Class A shares to below 5 percent, two weeks after the video rental company said it might seek bankruptcy protection and that its survival was in question.

Icahn sold the equivalent of about 2 million Class A shares on Wednesday and Thursday, reducing his beneficial ownership stake to 3.77 percent from 5.14 percent, a Friday

filing with the U.S. Securities and Exchange Commission shows.

He also reduced his Class B share stake in the Dallas-based company to 5.65 percent to 6.05 percent in the two-day period, the filing shows.

Once Blockbuster's largest shareholder, Icahn has unloaded roughly three-fourths of his Class A stake since late January, when he controlled a 16.87 percent stake.

Most of the sales were at or below the equivalent of 30 cents per share, regulatory filings show. Blockbuster shares at one time traded above $30 -- in May 2002.

There are no trading restrictions on Mr. Icahn and he can trade as he sees fit, just as any other shareholder, Blockbuster outside spokeswoman Rebecca Fannin said.

Video retailers such as Blockbuster and Movie Gallery Inc , which operates the Hollywood Video chain, have suffered as customers move to alternatives such as Google Inc's YouTube, Netflix Inc's mail-order service, and kiosk operators such as Coinstar Inc's Redbox.

Blockbuster operated more than 6,500 stores, including roughly 4,000 under the Blockbuster brand, as of January 3.

Last year, the company posted a $558.2 million net loss.

BANKRUPTCY WARNING

On March 16, Blockbuster said it might need to file for bankruptcy to address a roughly $1 billion debt load.

Its auditor PricewaterhouseCoopers LLP also said there was substantial doubt about the company's ability to continue as a going concern.

Icahn gave up his seat on Blockbuster's board on January 28, ending more than 4-1/2 years as a director.

In that capacity, he was a vocal critic of onetime Chief Executive John Antioco.

His investment with Blockbuster dates to at least 2004, when Icahn revealed having spent $83.8 million for a 5.8 percent Class A stake.

If it filed for bankruptcy, Blockbuster would join Movie Gallery, while sought protection from creditors in February in its second such filing in three years.

Blockbuster shares closed on Thursday at 25 cents on the New York Stock Exchange. The U.S. stock market was closed on Good Friday.

Earlier this week, the company said it does not meet Big Board listing requirements for market value.

(Reporting by Jonathan Stempel; Editing by Jan Paschal)

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