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After investors became aware that Blackberry Ltd will now scrap their former plan to find a buyer, their stock price went south. At this time, Blackberry Ltd made an announcement that it will try to raise $1 billion in new funds and that it will replace its top management, including its CEO Thosten Heins and several top directors.
According to the Financial Post, Fairfax Financial holdings missed their deadline to buy out the smartphone maker in a $4.7 billion dollar deal. At this time, however, Fairfax along with other institutional investors will buy bonds in the “$1 billion dollar private placement of convertible debentures.” Fairfax will take on $250 million in debentures which are convertible into common shares at almost a 30% premium to Friday’s closing price at $10 dollars a share. If the new debentures were converted into common shares they would represent about 19% of all shares outstanding.
Canaccord Genuity analyst Mike Walkley commented, “It surprised me. I actually thought they would have sold the company at any price this morning. Staying public was, I think, a worst case for the company in terms of turning it around.”
Analysts are clashing and converging in views and opinions, as the street responds to the news surrounding Blackberry Ltd. A senior market analyst from CMC Markets, Colin Cieszynski commented, “Shares could be active today off this news as traders weigh the failure of the company to attract buyers against the higher debenture conversion price.”
Interestingly, it is exactly the high yield which attracts buyers, but it is the high risk which likely caused the company to not find a buyer. Since high risk yields high return investors are likely between a rock and a hard place. Cieszynski noted, “If the shares fall too far too fast, the company could potentially start to attract hostile bids for its cash and patents.” It is safe to say that the street wants this company to go private.
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While trading of Blackberry shares was stopped from 8:26 to 9:00 am this morning, the number of shares may increase by as much as 20%. The stock price dropped by 12% to $6.84 in this morning’s trading. BCG partners analyst Colin Gillis commented that today was a rough day for Blackberry’s shareholders as well as other investors and their employees and customers. Gillis also believes that the company would have flourished if it had gone private. He commented, “This is going to be painful to watch. There’s some hard decisions that are going to have to get made.”
Image Credit: Gsmarena.com
