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Rizzi Capital is an independent wealth management partnership specializing in value investing to maximize return. We operate a long/short fund with zero leverage and invest mainly in Canadian companies.
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  • The Motive For BlackBerry's Takeover 1 comment
    Nov 12, 2013 8:25 AM | about stocks: AAPL, GOOG, BBRY

    I have already written a detailed summary of how BlackBerry (NASDAQ:BBRY) executives are responsible for the loss of billions of dollars in shareholder wealth. You can check out that article here.

    But for this article, I will get straight to the point. It is my understanding that ex-CEO Thorsten Heins and the rest of the top executive team worked over the last two years to sell the company in order to take advantage of windfall severance payments. Mr Heins and the other top BlackBerry executives stood to reap millions in the event of a BlackBerry takeover. All they had to do first was to convince the board of directors and shareholders that BlackBerry could not survive on its own.

    January 2012

    In 2011 BlackBerry was a company in turmoil, but it was not a failing company. Having just reached the 70 million subscriber mark, it could be said that BlackBerry was showing some improved financials and a growing subscriber base. Although some analysts at the time forecast a murky future, the general consensus was in fact that BlackBerry was effectively facing its troubles and was a competitive force within the mobile device industry.

    In 2012, Mr. Heins was named CEO. His stated goal was to guide the company to continued success and navigate the competitive waters. He had a strong management pedigree, and an engineering background. He was expected to manage the ongoing development and launch of BlackBerry 10 smartphone line. This would enable BlackBerry to further establish itself and maintain market share amid competitive threats from Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).

    The issue that most investors are upset with is that once establishing himself as CEO, Mr. Heins almost immediately started a process of puzzling business decisions which hurt BlackBerry and undermined its shareholders. Destabilizing the company and driving the share price into the gutter.

    To be sure, BlackBerry shares had already experienced a huge drop in 2011. Mr. Heins cannot be blamed for all of BlackBerry's troubles, however he does deserve a good share of the blame for the predicament BlackBerry currently finds itself in. The graph below shows the precipitous drop that BlackBerry shareholders endured in 2011.

    (click to enlarge)BlackBerry graph


    Mr. Heins and the other top executives at BlackBerry stood to make a fortune on BlackBerry's demise. As BlackBerry's market share eroded and the stock price fell into the single digits, they proposed to the board that the only remaining option would be to sell the company. Mr. Heins and the other executive stood to make a combined windfall of over $80 million from their huge severance payments as soon as a change in control of the company occurred. Shareholders on the other hand would be for all practical purposes, wiped out.

    The severance payouts which were expected upon a change in BlackBerry ownership are stated below:

    - CEO Thorsten Heins stood to get a $55.6-million golden parachute payment

    - Chief legal officer Steve Zipperstein, would get $7.9 million

    - Chief marketing officer Frank Boulben, would get $7.7 million

    - Chief operating officer Kristian Tear, would get $7.4 million

    - Chief financial officer Brian Bidulka, would get $6 million

    It should also be noted that Thorsten Heins currently holds only 179 504 shares in BlackBerry, worth about $1.3 based on Mondays share price. That pales in comparison to the $55 million payout he was expected to get as severance upon orchestrating a takeover of the company. It is clear that Mr. Heins had little incentive to look after shareholder interests. He had little incentive to get maximum value for the company in a takeover. He had no to effectively manage BlackBerry and maintain its dominance in the mobile device market. Mr Heins' greatest incentive was to damage BlackBerry to the point where shareholders and the board would agree to letting him sell the company. This change in corporate control would instantly allow Mr Heins to pocket his $55 million severance payment. The other executive who also stood to make millions with their golden parachute payments quickly fell in line and supported Mr Heins' plan.


    In examining the tragic story of BlackBerry, we can be quick to point the finger at a failed and misguided management team. That would be a rather simplistic and naive conclusion. Thorsten Heins had worked for BlackBerry since 2007 and before that, he was the chief technology officer at Siemens AG. He's a man with experience. There is a learning curve to every new job and being the CEO of BlackBerry would surely have been a challenge for any executive. But as difficult as the job could be, it would be almost impossible to conclude that Mr. Heins' massive failing could be blamed on incompetence alone.

    There was much more at play. Considering the huge payout that Mr. Heins and the other top executives stood to receive by enabling a takeover of the company, we can assume that personal gain was a driving force behind some of their absurd and destructive executive decisions.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Stocks: AAPL, GOOG, BBRY
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  • jbzet
    , contributor
    Comments (14) | Send Message
    So you speculate, I just don't agree.
    17 Nov 2013, 10:11 PM Reply Like
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