Seeking Alpha

BlackBerry slides as doubts grow about Fairfax's offer

  • With Prem Watsa's Fairfax Financial not putting additional cash into its BlackBerry (BBRY -2.2%) acquisition offer and having failed to provide details about its buyout consortium, skepticism is growing the deal will get the financing it needs.
  • Wedge Partners' Brian Blair: "Watsa is trying to salvage his 10 percent investment in the company and create a backstop while other potential investors hopefully bid it up."
  • Fund manager Marc Gross suggests financing could arrive if it's secured by BlackBerry's patents. Raymond James estimates the company's patents, software licenses, and network could be worth $2.8B.
  • Watsa, for his part, is making the case his deal would avoid the regulatory review that would come if BlackBerry was to be acquired by a foreign firm.
  • Shares are now 7% below Fairfax's offer price, and not far removed from where they traded before the deal announcement.
Comments (24)
  • tiger8896
    , contributor
    Comments (641) | Send Message
     
    Blackberry shareholders really have a winner with this company. How many companies get a buyout bid and actually go down in price after the buyout bid. Good luck if you're long because you're going to need it.
    25 Sep 2013, 09:50 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4728) | Send Message
     
    Hey, tig, can I take it you were being facetious with "Blackberry shareholders really have a winner with this company"? It looks to me like this will soon be a penny stock, unless the whole BOD and its senior managers commit collective Hara Kiri, to let more competent types take over, so how likely is that? Watsa is unlikely to be able to raise the cash, and may well never have intended to; they should turn this into a TV soap...or should it be a comedy? It is certainly a farce!
    25 Sep 2013, 09:57 AM Reply Like
  • David653
    , contributor
    Comments (2248) | Send Message
     
    oh for sure tiger, the offer of $9 was only a start price. the offer will be down to $5 in no time
    29 Sep 2013, 12:37 PM Reply Like
  • rtmunro
    , contributor
    Comments (545) | Send Message
     
    seriously...Watsa is way under water and the motivations for his phantom $9 bid have been thoroughly exposed by now.

     

    But what possible sales pitch could he be using to lure outside investment? why would anyone pay $9 for something that costs $7.75 (and falling).
    2 Oct 2013, 10:19 AM Reply Like
  • LYogi
    , contributor
    Comments (2408) | Send Message
     
    I suppose you've never heard about the concept of a takeover 'premium'.

     

    Hardly a shock for someone to pay more for a company that what the market is trading it at!!
    2 Oct 2013, 10:30 AM Reply Like
  • rtmunro
    , contributor
    Comments (545) | Send Message
     
    Wow, I just read the Bloomberg article. It sounds like Blackberry borrows $2b against its patents, which would then allow Watsa's financiers to agree to "buy" that secured debt. Essentially knocking $2b off the total up front outlay, while encumbering one of their sole assets with debt at a presumably enticing, longer term interest rate. I find this fascinating. Brilliant stuff.

     

    us little guys are getting a very small peek into how a billionaire becomes a billionaire, and leaves the bodies of friend and foe alike in his wake. Stay away from the stock, but follow the story, it is going to be very educational and fascinating.
    25 Sep 2013, 09:54 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4728) | Send Message
     
    It sure is; talk about "creative financing"!
    25 Sep 2013, 10:04 AM Reply Like
  • Dampflok
    , contributor
    Comments (955) | Send Message
     
    actually that is one of the oldest take over tricks: going back to the 80-ies (Nabisco comes to mind for some reason): using the cash of the target to finance the trade. This means that the new company is loaded up with debt (and tons of good will on the asset side to balance the balance sheet). Then the investment is recovered through brutal restructuring or sale of the pieces parts or both.
    25 Sep 2013, 10:28 AM Reply Like
  • rtmunro
    , contributor
    Comments (545) | Send Message
     
    yeah, I kind of figured this was nothing new. I realize this is probably covered on page 2 of 'financing a buyout for dummies' but I'll admit its new and interesting for me.
    25 Sep 2013, 11:12 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4728) | Send Message
     
    Ditto!
    25 Sep 2013, 11:16 AM Reply Like
  • Brent Fullard
    , contributor
    Comments (34) | Send Message
     
    Prem Watsa's $9.00 offer is not a bid (in the true sense of the word). His offer is not financed, and is presently just pie in the sky. That's a hard fact. It's time to start accepting the facts for what they are and not hoping for a rosier scenario to unfold, as many like myself have been doing for the past 9 months.

     

    No Prem's $9.00 offer is not a bid, it is merely a ploy. He is merely vending in his existing BB shares into his offer and contributing no new cash. He hopes that his offer will elicit a real bid from a strategic buyer like Microsoft, Lenovo, whomever. I hope he is successful in doing that, however any strategic buyer would quickly realize all they need to offer to trump Watsa's offer is $9.00, and not a penny more since they can provide investors with certainty of $9.00, in a way that Watsa presently can not (unless of course their competing offer has "hair" on it as well.) Combine that with the fact that Prem Watsa has said in the past that his preference is to exit via a sale to a strategic buyer rather than mounting a go-private offer of his own.

     

    Therefore in my assessment of the facts as we know them, the best case scenario is likely only $9.00 and the worst case scenario is even uglier than today's $8.60.

     

    I doubt very much that today's $8.60 bid is coming from risk arbitrageurs (who play the spread on takeover offers) given the uncertainty of Prem Watsa's "bid", but rather from the shorts who like the idea of covering at $8.60 versus $9.00, but those bids could disappear in the coming days depending on how things unfold.
    25 Sep 2013, 09:57 AM Reply Like
  • Yasch22
    , contributor
    Comments (432) | Send Message
     
    It's easy to project the usual Wall Street shenanigans on Prem Watsa, and to figure, Yeah, he's just like the rest of them cowboys. The problem is that Watsa really is cut from a different cloth. He's not part of the amoral Wall Street money junkies who learned their ethics from Ivy League business school fraternities.

     

    Watsa makes an offer, gives his word, stands by his word.
    He says he wants to keep the company in Canada, and to keep it whole, not chop it up and sell the parts. If that's what he says he's going to do, he'll do it.

     

    Seven weeks from now (5.5 weeks to finish the due diligence, and another 1.5 weeks to prepare the binding offer, we'll see Watsa firm the whole thing up at $9.
    If this be error, and upon me proved, I'll never write a comment on Seeking Alpha again.
    26 Sep 2013, 01:21 AM Reply Like
  • oldtimer125
    , contributor
    Comments (127) | Send Message
     
    I believe Blackberry and Watsa have a partnering deal lined up, but after Fairfax takes Blackberry private.
    25 Sep 2013, 10:02 AM Reply Like
  • rtmunro
    , contributor
    Comments (545) | Send Message
     
    On the plus side, we seem to be past the flood of auto-responses dismissing these stories as "negativity", "bashing", and "short seller/media conspiracy".
    25 Sep 2013, 10:16 AM Reply Like
  • Zack 800
    , contributor
    Comments (1191) | Send Message
     
    @rtmunro

     

    The negativity, bashing, short seller/ media is still alive and kicking ; more so now after the bid to take BB private.

     

    Hard to believe the B S that is now circulating!
    25 Sep 2013, 11:34 AM Reply Like
  • Ruffdog
    , contributor
    Comments (1884) | Send Message
     
    "...only $9.00 and the worst case scenario is even uglier than today's $8.60..." I agree but the share value is being reduced by the $1.00 per share per quarter the company is burning through. So by the end of the year it would be worth $8.00 to $7.60.

     

    I see this deal falling through and MSFT coming in as a white knight and buying BBRY next year for $7.00. BBRY is a great fit for MSFT and its enterprise customers.
    25 Sep 2013, 10:28 AM Reply Like
  • tiger8896
    , contributor
    Comments (641) | Send Message
     
    With a deal like Prem's I would go to MSFT/HP or anybody else and offer them the company for 6 bucks a share. That's a better deal than Prem's and it gives you a deep pocketed investor that gives you some breathing room during a restructuring.
    25 Sep 2013, 10:42 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4728) | Send Message
     
    How is it a great fit, Ru, when modifying WP to suit QNX would practically mean starting from scratch, and not just once, but with every update? Where's the synchronicity, or need; they've got Lumia and Asha (but seemingly not for long, in the latter case) so what use would yet another type of phone be to them?
    25 Sep 2013, 11:21 AM Reply Like
  • Sublime1977
    , contributor
    Comments (10) | Send Message
     
    Is selling 6m phones and signing up 25000 companies to their BES software really that bad? Investors need let the company have its time to put their business plan into action.

     

    The Banks hate BlackBerry because the company has no need for their services. If they approached Wall Street to raise them a few billion, Wall Street would be pumping the stock and the price would be much higher. It's all a game.
    25 Sep 2013, 07:10 PM Reply Like
  • rtmunro
    , contributor
    Comments (545) | Send Message
     
    its not the investors taking the time away from Blackberry. its the fact that in the aggregate, they are losing too much money too fast to keep the lights on.

     

    Blackberry is driving this bus. Investors are along for the ride. Some said, "hey that bus is running out of gas, has no brakes and is heading over that cliff at 100mph!" and jumped. Sure, it hurt. But they are still alive. Some can't see the cliff because they are fixated on the pretty clouds.
    26 Sep 2013, 01:12 PM Reply Like
  • la cabanya
    , contributor
    Comments (70) | Send Message
     
    PW show me the money please!
    If you don't come forward by November 4th and you say I am sorry but I don't have the money you are going to look very bad! Then maybe we can look for crowd funding!
    Required only 2000 guys with 500K each and go to GS or MS for the remaining billion with the guarantee of the patents!
    By the way BES, QNX and 70 million subscribers come free! and all other assets too!
    Can make a couple of billions in a couple of years!
    Not bad at all and no risk!And the satisfaction to tell TH he is free to go without the 55 Million!and PW will not get his pie either!
    Want to join, lets get moving!
    I have five guys ready to move, lets find the others!
    25 Sep 2013, 09:48 PM Reply Like
  • David653
    , contributor
    Comments (2248) | Send Message
     
    Money was not Blackberry problem in the beginning of their demise. so more money wont help. But pure innovation and creativity will.
    29 Sep 2013, 12:33 PM Reply Like
  • David653
    , contributor
    Comments (2248) | Send Message
     
    guess what folks due to technology is so rapidly changing, Blackberrys patents are probably out of date. A Samsung rep told me that they use different technologies in their encryption features pertaining to the platform Knox. This includes new technologies in messaging platforms that i believe Blackberry's rivals have their own patents to operate and NOT paying Blackberry for use of old technology patents.
    29 Sep 2013, 12:18 PM Reply Like
  • David653
    , contributor
    Comments (2248) | Send Message
     
    Could it be that the other possible investors in FFH consortium don't want their names to be mentioned is due to, something seems wrong in the way this all came around? I got a feeling if this deal goes through that the people of the world including investors that feel they were robbed will boycott Blackberry products. Because this also leads me to believe if Thortien was offered such a severance package, then did also other board members perhaps have been offered a similar package if they agreed to accept FFH bid? Sorry to say but Blackberry should be forced to work hard a innovate, sell phones and keep running as a public trading company but work to please investors and seek innovation in any manner its needs too. I am still claiming, if allowed to work with the the board of directors, we together can turn this company to profitability through pure innovation and creativity. Don't let FFH steal this company for only pennies. Any other investing companies that help FFH achieve this goal, will only tarnish their good name and will also fall in the end.
    29 Sep 2013, 12:31 PM Reply Like
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