This week started off with a bang. Fairfax pulled away from its initial offer to take BlackBerry private, and instead brought forward the idea of a $1 billion convertible debt offering. With BlackBerry’s balance sheet showing $2.3 billion in cash as of last quarter, this financing will put BlackBerry’s total cash balance over $3 billion when complete. It’s expected to be complete within two weeks of the original announcement.
Yesterday Bloomberg’s Hugo Miller put forth this fascinating story: BlackBerry’s tax lawyers are working hard on a plan to get back $1 billion in taxes previously paid to the Canadian government. The company has previously said it would get back $500 million in the spring of next year, but they’re apparently accelerating the process and working on a bigger tax refund claim by applying current losses to past tax bills.
BlackBerry’s tax lawyers are working hard on a plan to get back $1 billion in taxes previously paid to the Canadian government
If this all works out it means BlackBerry will likely end the calendar year with over $4 billion in cash, and $1 billion of this cash offset by convertible debt. Notwithstanding the possibility that BlackBerry could burn through a tremendous amount of cash and inevitably fail to turnaround the business, the stocks valuation has become attractive to those seeking deep value based on turnaround prospects.
BlackBerry’s market capitalization is $3.4 billion today. With cash (less debt) of over $3 billion, assuming the tax refund happens, and a bunch of other real assets (land, buildings, patents), the stock is probably cheaper than it’s ever been in history.
Can they get the hardware business to at least break even? Can they push forward in services and make money? At this point, all Wall Street needs to see is a valid business model that makes ANY amount of money consistently in the future, and the stock goes higher.
Assuming no takeover bids come into play here, I think we’re going to have a lot of interesting discussion about the business of BlackBerry over the coming quarters.