On Friday most of the media was busy writing about the 4500 job cuts being the last nail in the coffin for BlackBerry. Today the company shook things up yet again. The rumours of Prem Watsa and his firm, Fairfax Financial, leading a bid to take the company private have proven to be true. The board of directors at BlackBerry has accepted an offer, conditional upon due diligence, of $9 per share.
Let’s put this all in plain English, shall we? Right now BlackBerry is a public company. Its shares trade on the stock exchange and anybody can go buy or sell stock. I’m a shareholder as are many of you. So if this deal happens, Fairfax and a consortium of investors will buy our shares from us at $9 each. BlackBerry will still exist in the same form as it does today, but it won’t be publicly traded so they won’t have to issue the same kind of press releases or file financial reports. They’ll be able to go silent and hide any negative financial results while they work towards a long term comeback.
I thought it might be helpful to break down how various stakeholders are affected by all this:
BlackBerry customers: This transaction shouldn’t really affect customers since the company will still exist and still sell hardware, software and services. BBM will still go cross platform, and the company will still be fighting to win back market share. Customers (or possible customers) may read less negative headlines, which could lead more people to buy the products (hey, I can hope ...)
Employees: I think this is a good thing for the people employed by BlackBerry. Going private will allow them to stop worrying about all of the media trash talk. It should help morale. That said, it’s not a golden ticket, and it doesn’t mean layoffs will end. This is still a business and Fairfax (and the other consortium members) are the new owners of the business if this deal happens. There will still be a board of directors working on behalf of these new owners, and management will still be accountable to them. Private companies hire and fire people too. They just don’t have to deal with as much crappy reporting when things go sour.
Shareholders: I see this as a pretty crappy deal for us folks who own stock. Considering the stock dropped to about $8.25 after Friday’s earnings warning and layoff announcement, a $9 cash offer is only slightly above a price that bakes in a huge amount of pessimism. The fact that the board of directors was willing to accept this offer tells us that they felt there was a real risk of huge downside even from $8.25. Being taken private at $9 is nothing short of total failure in my books.
As I write this, the stock is hovering at $8.80, which is below the $9 transaction price. This tells us the stock market has absolutely no confidence that BlackBerry will attract a better competing offer, despite the existence of a go-shop clause allowing them to do exactly this.
CrackBerry: We realize many of you expressed concern for the future of this website. A go-private transaction actually helps CrackBerry. The board, and Fairfax, seem to be pretty convinced that BlackBerry will survive as a niche player with hardware, software and services. That’s what we cover here, for the benefit of the user base. Whether the company is public or private changes nothing in terms of what you guys need from us. That said, since I’m the guy who writes about the stock it will push me to spend more time looking at other things. I like change.
Financial media and analysts: Although they aren’t one and the same, both financial journalists and analysts rely on financial news on which to report or opine. Private companies don’t issue quarterly reports. They don’t press release layoffs. They don’t disclose executive compensation. Equity analysts don’t cover the stocks. So as a result, the financial media will find other stories to talk about and financial analysts will find other stocks to analyze with their extra time. Industry analysts like Gartner and IDC, however, will keep doing what they do. No change for them.
My summary thoughts: I didn’t think a go-private transaction would happen. I felt (and still feel) that going private won’t help this company execute on its strategy any better than being public would. It’s not like they’re getting a big injection of cash, and if they want to do this they should have done it 2 or 3 years ago.
That said, I recognize that going private doesn’t hurt. It doesn’t make things worse at all.
As a shareholder I’m completely shocked by the pathetic $9 price, and it tells me this company was in way worse shape than many of us thought. We knew things were bad, but for the board to agree on a pathetic premium to a post-selloff stock price? Disaster.
I’m not holding my breath for a higher offer. I’ll suck up the losses and move on. I still wish the company nothing but the best. I’m glad the employees will be able to go to work without having to read bad news stories in the paper every day on their morning commute. I’m glad the company will still exist and sell products that I actually want to use. I just hope the new owners kill off the acceptance of mediocrity that almost vaporized BlackBerry from existence.