BB - BlackBerry

[Guest wellmont]

market is getting skeptical of even $9 lol. in 1 month PW may find a reason to lower the bid. :)

[BG2008]

How would everyone handicap Prem/Fairfax lowballing the offer in the next couple of months? 

[bmichaud]

Is this not a perfect situation for Icahn to throw a wrench into this thing? $55MM payout to a CEO that's run it into the ground + a break-up value higher than the bid = Captain Carl opportunity...IMO

[Guest wellmont]

he doesn't want the risk of actually having to buy the thing. I don't think icahn likes to buy into companies in free fall. the way I look at this is that there are no buyers for this. and PW needs to save his bacon. because in the immortal words of GWB ---this suckers going down....:)

[Kraven]

The silver lining here is that soon we're finally going to be forever done talking about Blackberry.  It's been a lot of personal sniping back and forth.

 

I agree, the tech threads have become unreadable.

 

+1

[Cardboard]

"the way I look at this is that there are no buyers for this and PW needs to save his bacon because in  the immortal words of GWB ---this suckers going down....:)"

 

If there are no buyer, then he is not going to save his bacon but really hurt his own Fairfax. Fairfax is not that big of a company. Right now it is only $1.63 billion that he is investing ($4.7 * 90% - $2.6 in net cash) but, if it blows as bad as your posts are suggesting, then the cash will all disappear and Fairfax will be stuck with a money losing enterprise until shutdown. The best solution is for this to be sold to a related player in some ways: now or right after they acquire it.

 

Cardboard

[Guest wellmont]

they've been trying to sell it to strategics for 2 years. it does not make sense for strategics.  PW needs to act fast! because present management is simply trying to preserve their jobs. their incentives are different than his. they should have shifted to windows phone or android. nokia sold a device business. motorola sold a device business. because they shifted to OS that would survive. the decision to go bb10 destroyed value! this device business can't be sold because it is based on bb10.

[Cardboard]

"the decision to goo bb10 destroyed value!"

 

He was on the board since January 2012 and approved all these decisions. He praised publicly the new CEO.

 

I predict that there will be a lot of lawsuits out of this bid and since listed in the U.S., the SEC will take a deep look at this: terrible news released late on a Friday afternoon to create maximum panic, then take-over Monday at the lowered price.

 

Right from the book of Stevie Cohen. Bravo!

 

Cardboard

[Guest wellmont]

he did orchestrate a lower price for himself. it's obvious. TH is the one who should be sued. pw may not have been on the board in the last month or two, but he was pulling the strings.

[BG2008]

What are people's thoughts about buying the equity at $8.81 and selling the Jan 2014 $9 calls for $0.48? 

 

You get about 2% on the spread and you get about 5.5% on the call premium.  If the deal hasn't close by Jan 2014, then you write another call and collect more premium.  If you stock trades above $9, the $9 call gets exercised and you let them take your stock.  If there is an overbid and the calls trades closer to intrinsic value (In the Money intrinsic value with no value attributed to the optionality) then you exit your trade and leave a little on the table.  I think there's too much reputational risk for PW for him to not follow through with this deal. 

 

What are people's assessment of the deal falling apart? 

[SharperDingaan]

Most would think that someone was presented with an ultimatum; do the deal, as is, or we lend our shares out for a short attack - & collapse the share price.

 

It is highly likely that the final price will not be $9; it will be $9 less adjustments, & those adjustments will be a write-off of just about everything they have - & a provision for the termination of all employees & financial commitments. The share price will still fall, but it will not collapse.

 

FFH will do very well, but this is a work-out because they had no other choice. These things happen, but they should be rare events, & they occur because your investment process failed. One or two is fine, but FFH seems to have a pattern of them. 

 

SD

[rpadebet]

he did orchestrate a lower price for himself. it's obvious. TH is the one who should be sued. pw may not have been on the board in the last month or two, but he was pulling the strings.

 

I don't see anything pre-orchestrated going on here. IMO this bid was required to put a timeline on the management as there was no incentive for them to push for the sale. It also serves a secondary purpose of anchoring the stock price in the short run.

 

Even if there is no higher bid now, PW's only exit option is to find a buyer for parts/whole later. I think his incentive is to see that the management aggressively shops this thing now.

[bmichaud]

http://dealbook.nytimes.com/2013/09/23/a-deal-for-blackberry-thats-not-yet-a-deal/?partner=yahoofinance&_r=0

[value-is-what-you-get]

What are people's thoughts about buying the equity at $8.81 and selling the Jan 2014 $9 calls for $0.48? 

 

You get about 2% on the spread and you get about 5.5% on the call premium.  If the deal hasn't close by Jan 2014, then you write another call and collect more premium.  If you stock trades above $9, the $9 call gets exercised and you let them take your stock.  If there is an overbid and the calls trades closer to intrinsic value (In the Money intrinsic value with no value attributed to the optionality) then you exit your trade and leave a little on the table.  I think there's too much reputational risk for PW for him to not follow through with this deal. 

 

What are people's assessment of the deal falling apart?

 

Well I gave some serious thought to selling jan 7 puts this morning for 1.54 which would require me to buy the stock at a net cost of current assets-all liabilities.  Then this afternoon I felt like ERICOPOLY watching SHLD.  Choose your remorse!  Sold some 7 for .50 and .48 this afternoon.  I think the deal will go through above 7 a share.

[alertmeipp]

wow, the offer sucks. If it worth 9 bucks to Prem, how can it not worth more to a actual tech company.

Seems like a deal to save face or to trigger another deal.

[txlaw]

Well, so we are definitely coming to the end game.

 

The question now is whether OPMIs will even get anywhere close to run-off/break-up value.  Obviously, that can only happen if alternative bidders come in -- either other PE buyers or strategics.  But the floor put in by this highly conditional cash bid also indicates a ceiling for OPMIs that is substantially lower than what I believe run-off/break-up value to be, even with alternative bidders.  This is very disappointing.  :-\

 

So why would BBRY management agree to go public with this highly conditional bid if run-off/break-up value is much more than $9 per share?  It looks to me like BBRY management is trying to put a floor on a deal price, a timeline on the shopping process to get alternative transactions on the table sooner rather than later (the "flushing out alternative deals" theory), and keep consortium support for a PE floor bid led by PW. 

 

The $9 conditional bid definitely seems opportunistic on the part of PW and the consortium.  BBRY management probably had to agree to the bid in order to keep the other consortium members -- whoever they are -- from withdrawing as potential buyers or setting an even lower floor bid, which would set the bar lower for possible strategics deals.  In other words, management couldn't afford to watch the stock price collapse and set the ceiling even lower for alternative transactions.  (As to whether there may have been a threat made to dump shares or lend them out, I suppose that's possible -- shady but possible, I guess.)  While PW certainly would have had an inkling about how badly BB10 was doing and the types of write-offs coming, I don't think his consortium partners would have been given access to that information.  Thus, when the pre-announcement was made, the consortium members other than FFH likely immediately reduced the price they were willing to pay in their negotiations with BBRY management. 

 

So what happens if no alternative transactions emerge?  I could definitely see an even lower bid by the consortium after the DD is finished, but that will depend on the members of the consortium and whether they can "find" something to justify their re-trading the deal.  As to whether BBRY management would accept a lower deal, that's hard to say, though I would note that Heins would definitely be getting a payout if he were to accept such a deal.

 

I feel that deal dynamics have once again foiled my plans to get IV for my shares, which I definitely believe is substantially higher than $9 a share (and which the consortium clearly believes is the case as well).  This happened to me with DELL (though I still made a substantial profit), and it happened with CLWR (I dropped out with a substantial profit before the bids hit close to IV).  I escaped FBK, though in retrospect perhaps getting caught in FBK would have made me more skeptical about actually getting run-off/break-up value with BBRY in the end.

 

I'll be holding on to my shares until the November deadline. 

[wescobrk]

It looks like prem's average cost is 17 bucks a share for blackberry

[Cardboard]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

[Myth465]

This has been a cluster ..... for quite a while.

Glad its closer and closer to an end. I knew PW would do a take over, and told a friend who was long bullish that would be the outcome.

Fool me once, Fibrek... Still have my popcorn, a few more innings in the show.

[ItsAValueTrap]

Umm... did anybody else short Blackberry?

 

(*I've lost more money from being long Blackberry than what I might make shorting it.)

[Parsad]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

[SharperDingaan]

If you wanted to short BB in quantity, there is pretty much only one place that you could get enough shares from; HW & his institutional partners. They would have had the share loan requests in hand when they made their offer, & their lawyers would have made BB aware of the quantity. Intentional or not, the polite name is greenmail.

 

Disturbingly, this whole transaction is 1 day after we suggested an aggressive short campaign to flush out a bid. We were not expecting the angels to be the ones executing the campaign.

 

SD

 

 

 

[StubbleJumper]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

 

Yeah, but we knew the inner workings of ORH and Prem knew them even better than we did.  And, did we get fair value for our ORH shares?  Just sayin'    :-[

[Guest Dazel]

 

 

Very happy that I do not know their business and avoided this like the plague. ( I watched Palm pilot implode from the sidelines where we considering shorting it.)

 

I thought Prem was nuts when he was buying at $50...this is the final average down and he will salvage the investment for Fairfax...I would bet a lot that the consortium involves the founder coming back in to clean it up...it is what I would do.

 

For those who expected to own shares for a few months and get a windfall from a buyout...you are not business people. Prem is trying to salvage Blackberry and his investment. He did shareholders a favor with out him it would be $5.

 

Dazel

[Parsad]

"...then BlackBerry shall pay Fairfax a fee of U.S. $0.30 per BlackBerry share..."

 

That is an additional $3 per share that Fairfax will receive for its shares if an alternative transaction is proposed (they own roughly 10%). That is very significant and a very large break-up fee of about $150 million for a transaction with a net Enterprise Value of only $2.1 billion, highly conditional, with no secured financing and no disclosure on who is into this consortium. For example, they would get their $3 with just a $9.25 offer. All upside for Fairfax, none for other shareholders which Mr. Watsa was supposed to represent for over 1 1/2 years. Sure he resigned recently to avoid such conflict of interest, but failed miserably at steering this company in the right direction.

 

Mr. Watsa with his tough dealings will see his reputation severely impaired IMO going forward which will be a big hurt to Fairfax. Fibrek was tiny but, how this deal was entered into will get a lot of attention in coming days unlike today's glowing remarks.

 

When you keep dealing with bad businesses, you often get dragged in the mud too. It will be impossible to attract good quality medium and larger sized businesses (often family owned) a la Buffett into Fairfax. It is all about trust and when there are constantly questions about so many deals, the quality of what is being bought, then the conclusion as to who you will prefer doing business with is obvious.

 

Cardboard 

 

Cardboard, I think this is very unfair considering how fair Prem has been in virtually all aspects of life and business.  We have no idea what a shitshow the BBRY board may have been, considering the results so far.  Prem and Fairfax shareholders have the most to lose as the largest shareholders, so would you not assume that they are going to do everything they can to protect the investment.  Results for BBRY have been horrible, so is it really a stretch of the imagination to believe that the board may have been moving too slow or dysfunctional?  Not saying that it was...but it's a more likely possibility than Prem screwing over BBRY shareholders, especially since his average cost is $17 and he was working with the board to try and salvage the business. 

 

I think the Fibrek deal is also similar in that you don't know exactly what the inner workings were and what the whole conversation was, yet assumptions have been made that Fairfax was only interested in making a buck and it didn't matter how other Fibrek shareholder's felt.  Just my two cents.  Cheers!

 

 

Yeah, but we knew the inner workings of ORH and Prem knew them even better than we did.  And, did we get fair value for our ORH shares?  Just sayin'    :-[

 

So if the markets value something at a steep discount to intrinsic value, and someone offers more than the market price but less than the intrinsic value, then that isn't fair?  If FBK, ORH and BBRY shareholders could get more, somebody should have offered more sooner.  I don't think Buffett and Prem are in the business of paying full price for everything, otherwise their shareholders might get peeved.  Cheers!