The investment community has reacted broadly positively to Monday’s announcement from BlackBerry that it has launched a strategic review and is open to the possibility of selling the business.
At the end of last week, shares in the struggling Canadian…
The investment community has reacted broadly positively to Monday’s announcement from BlackBerry that it has launched a strategic review and is open to the possibility of selling the business.
At the end of last week, shares in the struggling Canadian smartphone manufacturer closed at US$9.76. Today the stock opened more than 14% higher, at US$11.14.
In a note, Scotiabank said that taking into account the value of BlackBerry’s patents and the cash it holds, the company could be acquired for US$14.20 per share within the next six months. It said its conviction was based upon BlackBerry’s assets, which it still believes are attractive, and the board’s motivation to get a deal in place.
“The ideal partner will be one that will be able to assist the company to scale its assets,” Scotiabank analyst Gus Papageorgiou said in the note. “As a result we believe the end outcome will be an all-out sale or potentially a large equity infusion and strategic partnership, from a larger player.”
Sale could come at discount
However, some analysts still maintain reservations about the long-term viability of the business. Evercore Partners, which also upgraded the stock on the back of the announcement, is less optimistic than Scotiabank.
“We cannot know the price and/or the terms of a strategic transaction, and note that such a transaction could actually come at a discount rather than premium to the public market value of the shares,” Evercore analysts Mark McKechnie and Zachary Amsel wrote in a note to clients.
The firm suggested that were a new owner to come in, the monetisation of BlackBerry’s strategic assets could be accelerated, specifically a split between the hardware and service sides of the business.
No end in sight
Conversely Yankee Group senior VP of research Wally Swain worried that the process may not beneficial to BlackBerry.
“What I fear is that institutional investors will be happy with a partial sale that runs up the stock price from where it is today so they can close out their positions in better shape, but that will still leave management and the success of BB10 [handset] hostage to the buy/sell/hold tri-polarity of Wall Street.”
In a research note, Swain said that being a public company was a disadvantage for BlackBerry and that it may fair better out of the public eye: “For many companies, a stock exchange listing has become a source of cost and management distraction. For a company that is trying to become the centre of a new ecosystem, this is worse because stock market pundits screaming ‘sell’ make it look like the company, and hence BlackBerry 10, are non-viable.
“Going private or selling 100% to someone else would (after closing and delisting) take all this noise off the table … It may still fail but it will be on whether the product is a success or failure.”
PE indifferent to acquisition
BlackBerry’s announcement followed almost a year of quietly canvassing possible buyers unsuccessfully, Bloomberg reported citing two people with knowledge of the matter.
JP Morgan and RBC Capital Markets reportedly contacted a number of would-be acquirers but found little interest from potential bidders. PE firms were especially indifferent to the prospect, the report said.
