Note: This piece is being posted under my name (Kevin), but is a joint piece written by myself and Chris Umiastowski. To keep things simple, and since Chris and I agree on pretty much every major aspect of this piece, the wording "we" is used throughout instead of "I".
Warning: This post is obviously longer than our usual post here at CrackBerry, but for good reason. We didn't want to skimp on details.
Last year a relatively unknown merchant bank named Jaguar Financial made a small investment in RIM shares (we'd normally put a link to the Jaguar website in here, but it's flagged for malware so we linked to a Google search instead).
The company's Chairman and CEO, Vic Alboini, then became fairly well known in the media as an activist shareholder. Jaguar Financial has a market cap of just over $3 million as of this writing. To put this in perspective, RIM's market value is about 1100x bigger than Jaguar. So it stands to reason that, despite never disclosing the size of his position in RIM, Alboini is a very tiny shareholder. Despite this, Alboini commands a huge influence with the media as they believe he and his views represent a significant amount of shareholders. The media seems to love going to him for quotes.
We're writing this article to help readers understand who he is, what he's asking for, and to have an honest discussion of whether he's helping or hurting RIM.
Vic Alboini is a former securities lawyer and held the position of Partner at well-known Bay Street firm McCarthy Tetrault. He has published several books on securities law and practice. He now heads up Jaguar Financial (a merchant bank) and Northern Securities (an investment dealer).
RIM is not the first company Alboini has gone after as an activist shareholder. But it is certainly the biggest. Jaguar Financial has also been penalized by security regulators on several occasions, including as recently as this past Monday. While a discussion of these fines are beyond the scope of this article, they need to be mentioned because they may be part of the reason that RIM refuses to give Alboini the time of day.
It was only at this year's AGM in Waterloo when we saw Vic Alboini in action up close and in person. Our initial impression? He seemed to be on the hunt for media exposure. And we don't like the way he comes across in the media (which we'll explain) and many of his quotes could be harming what is left of RIM's brand.
Jaguar's size puts them pretty much in the camp of a large retail investor rather than in the same league as institutional investors (mutual and pension funds). There is clearly no love between the two sides. Research In Motion gave us a statement that explains its feelings toward Alboini:
"Mr. Alboini is entitled to his opinions and RIM has reviewed his proposals, but does not believe they have been advanced in the best interests of RIM or its stakeholders. While he has successfully attracted media attention, Mr. Alboini has no technology experience and, despite his claims to represent other shareholders, has provided virtually no transparency into either his alliances or his motives."
Even though RIM isn't talking to Alboini, on the surface it seems he's had many of his demands met. Vic has been outspoken in asking for an independent and revamped board of directors, a strategic review, and a replacement of Jim and Mike as Co-CEOs. All three of those things have happened, or are in the process of happening. However, as you'll discover in the rest of this article, what Vic really wants is sincere exploration of the sale of RIM (and a board that has the balls to implement such an M&A oriented strategic review).
The show begins... no parking lots for this guy.
Watching Vic Alboini in action at RIM's AGM, we felt as if we were witnessing an actor playing a role in a movie, and Vic does look and talk the part of a high falutin Wall Street character. His grand entrance attracted attention as his driver pulled the black Towncar up right beside all of the media cameras. Everyone else parked in the designated lot. He built up anticipation by standing in the crowd of cameras with his BlackBerry Bold 9900 to his ear, supposedly finishing up an important call. Remember the film crews were looking for shareholders to interview, and Vic is interview gold. He gave several interviews before heading into the AGM.
Making the media wait makes for a great photo op
Within the AGM, it seemed unusual for Vic to make a statement at the start of the meeting. Normally shareholders speak during the Q&A session. Why? Perhaps because the media was allowed into the AGM only for the first 20 minutes to get their photo ops. With the Q&A coming later in the session, the cameras would not be around to see Vic make his statement or ask his questions.
No waiting for Q&A, Alboini made his statement early while the media was in the room
When he did have the microphone and the attention of RIM's board and executives, Vic came across as very controlled and statesman-like. The contrast in his delivery between how he speaks to the media and how he spoke to RIM within the AGM was night and day. He is much more vociferous to the media.
He also left the meeting early to do an interview with BNN (right before Kevin was on). I noticed he stated a key fact wrong. This was regarding the percentage of shares withheld for director nomination. The highest percentage of votes withheld for any director was 30.25%. During his BNN interview, Vic stated that it was 35%. In another interview we observed him giving to the media following, that number jumped to 40%.
Vic left the AGM early to do an interview with BNN
Following this interview, Vic returned to the area outside the AGM and gave interviews until every media outlet had left. Following him around, his actions reeked of self promotion. He delivered his words under the guise of shareholder interests. But our gut told us there was (also) another agenda at play here. If change at RIM is truly what Vic is after, his performance at the AGM did not feel like the most constructive path.
CrackBerry got on the phone with Alboini for a full hour and 20 minutes.
We grilled him about everything that seemed important. At the end of the interview, our view had changed somewhat. We still don't like the way Alboini seems to sneak incomplete stories into the media. But we also had a chance to speak to him in great detail.
So here's the quick CrackBerry take:
Many of Alboini's points, when explained in full detail, are solid. Unfortunately, we don't think his strategy of addressing the media is helpful. Alboini has a track record for feeding the media just enough of an interesting line to publish, but not enough to represent or portray a complete picture. The bottom line is that, while we don't like the approach Jaguar takes, their criticisms and ideas are useful. RIM could potentially mitigate damning media stories by engaging Jaguar in direct conversation.
There is no question Vic Alboini's media strategy is damaging to shareholders, in our view. We asked Alboini about this in our interview and he said, "I can't be held responsible for [the media's] accuracy".
We respectfully call for a higher standard. In a series of fairly short interviews with dozens of media agencies, we don't think he's doing enough to make sure his story is accurately represented. Letting the media misunderstand you over and over is nearly as bad as lying to them in the first place.
The biggest error the media is propagating is about Alboini's control over RIM stock.. It has been reported over and over that Jaguar represents a group of shareholders who collectively hold 8% of the stock. He's generally not quoted as saying this. Instead, the media interprets what he says, publishes something that isn't quite right, and every other agency just reiterates the same crap.
For example, here is how Jaguar Financial explains its situation. This comes from an October 2011 press release:
"As previously announced Jaguar has the support of certain institutional shareholders representing approximately 8% of the issued shares of RIM. None of the supportive shareholders have any agreement with any of the other supportive shareholders including Jaguar pertaining to any matter including the purchase, sale, ownership or voting of RIM shares."
Notice that the first sentence outlines the important 8% metric, while the second sentence factually and correctly identifies the fact that no formal agreements are in place between any shareholders in Jaguar's supportive group.
Here's how Vic Alboini described things to us:
"It's important for you to realize we don't represent anybody. We've never said we represented any other shareholders. We've said there are supportive shareholders. What's important is that the people that we talk to we talk to on general terms on corporate governance and a strategic review."
That seems pretty clear to us. Alboini has spoken to many shareholders who agree, in principle, with many of the changes that he's proposing RIM make. And most of these changes don't necessarily involve a sale of the company. The changes he's pushing for seem much more governance related, and quite reasonable.
But that doesn't make for interesting news, we suppose. So most media stories neglect to explain that Jaguar's "support" is completely informal. As a former securities lawyer, we expect Alboini to understand that most journalists won't think to ask about this important caveat. And he's not doing enough to set the record straight.
One more clear example: Before we move onto the meat of our interview with Alboini, here's one more example of how irritated we are by his use of the media to propagate a negative message that can harm shareholders. During the AGM we overheard him mention to at least two separate media representatives that Thorsten Heins sold 1200 shares of RIM on July 3rd. He then added the tag question, "Why would a CEO that believes in his company do that? Why would he sell shares?"
Here's the problem with this: Executives get partially paid in stock. As the stock vests, it counts as income. So most companies setup automatic plans whereby enough stock is sold to pay the taxes immediately as stock grants vest. In Thorsten's case he had a chunk of 2500 shares vest, and RIM automatically sold 1181 of those shares to cover taxes.
Alboini later clarified with us that he doesn't care why the shares are being sold - just that the CEO shouldn't be selling stock. Vic, if you really feel this way then write an open letter about it or express your views in a fair and proper manner. But don't mislead the media into thinking the CEO is dumping shares.
To separate fact from fiction, and to set a higher standard for accurate reporting, we'd like to share with our readers, in details, the key points from our lengthy discussion with Alboini.
He agrees RIM needs to bring BlackBerry 10 to market.
"Certainly you don't want to give up on BB10 given the powerful QNX software. There's no question you want to give that a chance."
They need to aggressively explore transaction alternatives NOW, and board chair Barbara Stymiest does not have the necessary skills to do manage a M&A strategic review. Alboini couldn't have made these points more clear, and he left no room to misinterpret his view. He sees RIM as being in a desperate situation. While he wants the company to give it a go with the launch of BlackBerry 10, he sides with many of the bears who believe it won't be enough to save the company.
"But we don't see [BlackBerry 10] being the salvation for RIM. The problem is that if you wait until you get the results from the emergence of the BB10 phones, you could very well have a $3 stock price. At that point if you're starting to look at strategic options you're talking about selling the company or parts of the company that might give you the $3, maybe $4 maybe $5 if you're really lucky. So our concern is that you've got to get underway now in examining the options. It doesn't mean you have to necessarily implement any particular option but you've got to know what the landscape is now."
We pressed to understand the difference between what Alboini wants versus what RIM has already said they are doing. After all, RIM has hired JP Morgan and RBC to help it review strategic alternatives. However, Alboini points out that RIM's focus (as evidenced by the company's own AGM slides) is on partnerships, joint ventures and licensing.
This, in his view, means that RIM is not seriously considering a sale of any or all assets. And he sees this as a huge mistake.
"I don't have any confidence whatsoever that they are seriously pursuing the sale of RIM on a standalone basis, the breakup of RIM and the sale of any parts or any of the businesses."We respectfully disagree with Alboini here. First you need to decide if you have a business worth saving. If yes, then you don't look for buyers. But to do a proper analysis of the potential of RIM's business, you need a board with deep technology strength, which leads us to our next topic.
He strongly believes they should revamp the entire board of directors. Honestly, this one is impossible to argue with. Alboini said to us, "We're being critical. But we're being critical for a purpose. And that's to get a sense of reality into a board that's way too cozy way too clubby, with zero experience in the tech industry. That's what we're faced with, which is a disaster."
Alboini is not enthused with the fact that RIM's board still consists of many of the same names who sat at the table during the company's downfall since the launch of the iPhone.
"The reality is that [Stymiest] has been there for five years. So have David Kerr, Roger Matin and I think John Wetmore. All of these directors have been there during the missed opportunities, the huge miss on the strategic vision on the late Steve Jobs. That missed opportunity was missed by the board and the management team. And we still have the same board. And so we have asked that the board be revamped and add tech experience that it doesn't have right now."
Alboini speaks highly of one new director, Timmothy Dattels. But he sees the "bolting in" of this new member as a huge mistake versus replacing an existing member.
"We're very happy Tim Dattels joined the board. We think he's going to be an independent thinker. We think he's' got excellent transaction experience. Hhe's got a great career pedigree. And that's the kind of director that should be brought to the table. But what a mistake to add Tim Dattels to the board and not replace one of the wrongdoing directors. What a huge mistake. So you're basically saying, yeah, we'll revamp the board but our definition of revamp is not to replace but to bolt on to a poor board."
RIM acknowledges the need to add more technology bench strength to its board. But there are already 10 "asses in chairs" around the table, and we agree with Alboini that it's long past the time when certain board members should vanish from their chairs.
Happy about the restructuring and hardware consolidation strategy. When asked what he's satisfied with at RIM, Alboini pointed to the layoffs as a necessary step he was pleased to see the company take. He also appreciated RIM's recognition of the need to consolidate its hardware portfolio to far fewer models. Again, these are both points we fully agree with.
Alboini didn't seem to know much about the inner changes at RIM, given his focus on board- level changes. Alboini has been critical of RIM's installation of Thorsten Heins as CEO in the past. Here' s what he said to us during our interview:
"We've called all along for a transformational leader. What we think we have is a transitional leader. We don't think Thorsten Heins is CEO material and we don't think he's going to last."
We respectfully disagree. In fact, since Thorsten has been appointed as the leader of BlackBerry nation, he's implemented a significant management shakeup, cut thousands of jobs, and hired three new C- level officers (marketing, operations and legal). He's re-aligned more company resources towards the launch of BlackBerry 10, and made the decision to focus only on areas where RIM can add value, and partner in other areas (such as consumer apps).
RIM's problems are not about vision right now. They're about execution and focus. Thorsten grabs us as being absolutely the right guy for this job. Remember, Tim Cook of Apple is not a visionary leader like Steve Jobs was. Yet Apple seems rock solid since the unfortunate passing of Jobs. That all said, in our interviews with Heins to date it's apparent to us that he does have a clear vision for mobile computing and the role of BlackBerry within it.
We like many of your ideas. We really do. But you have to remember that the media doesn't understand the details. They don't always understand just how small you are. They don't understand that you don't really control any meaningful chunk of stock. They take your past statements, misunderstand them, and regurgitate them in poor form, leading uninformed readers (including potential and current BlackBerry customers) to assume you're a large, powerful activist shareholder. This is harmful to RIM and we think it is your responsibility to make sure the media understands who you are and what you represent.
Agreeing with many of your ideas is very different from supporting your actions. From where we sit, your use of the media puts you squarely outside of the interests of shareholders.
It's time to pick up your game. Many of you have been sitting on the RIM board for far too long, and have almost nothing of value to add given where the company is positioned today. RIM needs a board who understands technology and the global wireless communications market. If you love the company, it's time to leave them and make room for better qualified directors.
There is a shortage of journalists who are willing to check and understand facts before writing stories that distort and perpetuate wrong information. It's time to hold yourself to a higher standard. Instead of regurgitating things that you aren't even sure you understand, stop and ask. There are plenty of people willing to help.
We really hope following this post that Vic Alboini's name appears less in the media. But if that's not the case, we hope his comments are more constructive and transparent. If you see articles popping up on the web that don't meet this criteria, send the journalist a link to this article. And feel free to send Jaguar a note letting you know that if Vic is going to keep up with his comments to the media, you expect a higher standard. Use info@JaguarFinancial.ca to let them know how you feel.