Verizon, Short-Sellers Show Strong BlackBerry Interest; Shares Tough To Borrow

| About: BlackBerry Ltd. (BBRY)

Verizon Wireless (NYSE:VZ) has been very quiet about BlackBerry (NASDAQ:BBRY), until the Jefferies 2013 Global technology conference. BBRY's Z10 has been the subject of numerous articles here on SA. The imminent debut of the Qwerty keyboard Q10 built on the BB10 operating platform seems to have brought Verizon Wireless out of the closet. AllthingsD reports:

Verizon Wireless CEO Dan Mead is rooting for a BlackBerry comeback. In his view, the Android-iOS duopoly that Google and Apple have established is begging for disruption, and BlackBerry is potentially one company to provide it.

"We think that there is an important place for BlackBerry," Mead told attendees of the Jefferies 2013 Global Technology, Media and Telecom Conference this week.

Our independent informal check with Verizon retailers confirms Z10 sales, which support estimates of 3-4% of total store sales. In addition, Verizon Wireless sales agents say there are a lot of inquiries on the coming Qwerty keyboard model Q10. So now what happens with the significant shorts outstanding, over 164 million as of April 30th, according to Nasdaq. Coupled with resurfaced rumblings of Carl Icahn's interest which we have previously written about, BBRY may be poised for its long awaited squeeze and exit party for the shorts who have garnered lots of ink here on SA. We checked Friday with our prime broker on availability and costs to borrow BBRY shares and the conclusion was not good news for the shorts. Availability of shares is almost zero, many wire houses are rationing shares for borrowing and the price has gone up from a negative 6% rebate to 8.5-9%. Things are getting tight and BBRY shares may soon erupt.

Verizon may be in the hunt to do something more ambitious itself in terms of M&A. In fact, VZ is pushing to buy out its joint venture partner Vodafone (NASDAQ:VOD). CNBC reported:

Six major Vodafone investors said $100 billion was not enough for the British company's stake in its U.S. joint venture with Verizon Communications, and urged the latter to come up with an offer of at least $120 billion. ...

...Should the $100 billion figure stand, the six shareholders, with around 1.3 billion of Vodafone's shares between them, said they would prefer the British group to push for a full merger with Verizon instead.

We think there may be more behind the kind words VZ has for BBRY. In fact, they may need to buy BBRY to block the push for a merger from Vodafone. Why? Because the complexity of a three way deal with VODAF, VZ and BBRY would make things extremely political and may make VODAF settle for less than the $120 billion the large shareholders are demanding. In basketball, this is called a 'pick', in water polo it's a 'screen'. Any way you slice it, BBRY, with its ever growing healthy debt free balance sheet, seems to be in a very nice position to bring upside to its shareholders - especially with the valuable off-balance-sheet asset of the growing short interest in its stock.

And then there is this report:

Earlier today a report from Scotia Capital analyst Gus Papageorgiou stated that if Research In Motion Ltd can't do enough to stabilize itself with its current range of smart phones, it is likely that a company like IBM (NYSE:IBM) will swoop in and take over at the firm. The report put a price target of $22.50 on the company's shares, and gave them an outperform rating. Shares in the company opened today at $15.15.


We think BBRY has done a great job turning the ship around and has carved itself a nice piece of global wireless's computing future. With the short interest and the constant chatter of strategic interest in the company, we think the shares will continue to be volatile and are poised in the shorter term to go higher, very possibly violently higher.

Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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