By: Benj Gallander
Dec 12, 2023
Blackberry Ltd. (BB-T -0.72%decrease) seems to be thriving on film and in television – the stock, not so much. It currently trades at around $5.60, up from its bottom of $4.31 early this year. That is far from the high that it hit in 2021, when a meme-stock rally pushed it above $25. Let us avoid rhapsodizing about when it neared $150 in 2008. As they say, “That was then, this is now.”
The Contra Guys have a long history with this company, buying and selling numerous times since 2013. Over all, it has proven to be very profitable, and at this point Ben is content to regard it through the rear-view mirror. Benj, on the other hand acquired an additional position in December, 2022, at $4.33 and fortunately, at the moment, it is in the money. He also still had some remnants of previous purchases.
Blackberry is far different now than it was when Benj’s last procurement was made. At that point, Prem Watsa’s chosen saviour, John Chen, was still the CEO. He had nine years in the captain’s chair and when he vacated it, the stock price was less than when he signed on. By that metric, his reign was not a triumph. Revenues were decimated with the most recent quarter registering a relatively puny US$132-million. The operating loss was US$47-million. Meanwhile the company lost money during six of the past 10 years.
One thing that gives us pause is that if it appeared Mr. Chen was leaving at the conclusion of his obscenely lucrative contract, why was a successor not already in place? To us, succession planning is key and the lack of foresight by top brass is unfathomable.
Last summer, the company was working on strategic alternatives. It appeared quite reasonable that it might be sold, perhaps to the major shareholder Fairfax Financial Holdings. That could still come to pass. Of course, it begs the question: at what price? The book value is less than US$1.50 a share, but it is quite possible that if a suitor comes knocking, the price could be in the US$7.50 range, where the stock traded over the last year. The price has often traded at large multiples of book value in the past.
Meanwhile, a result of the strategic review was that BlackBerry decided to split into two operations. Normally when that happens, it is bullish for shareholders, kind of like a synergy where 1+1 = 3. One enterprise will be for the internet of things with the remainder for the cybersecurity business.
This will be done under the newly anointed CEO John J. Giamatteo, who has been the president of BB’s cybersecurity business since 2021. Having someone who has worked with the enterprise for a few years should help with the transition.
Benj is content to hold his shares and if the stock price dips under $5, he might add more. But like Ben did, he would prefer to sell at a much higher price and move on from this stock. While it has been long term, the beauty of this play is that it has proven to be quite profitable, thus far, but in a much more complex way than the usual Contra methodology of buying a position and then selling part or all of it when a sell target is reached. We almost look like traders with this enterprise, which is certainly not our modus operandi.
Meanwhile, both of us saw the Blackberry movie and enjoyed it. Perhaps it is time to sit back and watch the TV series instead of watching the drama in the stock price play out this week.