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BlackBerry shares plunge after smartphone maker calls off sale, CEO resigns

The Canadian smartphone maker announced a revised investment deal involving a $1 billion private placement of convertible debt.

BlackBerry CEO Heins resignsEnlarge
BlackBerry Chief Executive Thorsten Heins speaks at the BlackBerry 10 launch event at Pier 36 in Manhattan on January 30, 2013 in New York City. Heins has resigned from the smartphone maker. (Mario Tama/AFP/Getty Images)

BlackBerry has pulled down the for-sale sign, temporarily at least, after failing to secure a solid offer for the company.

The Canadian smartphone maker announced Monday that it will instead raise $1 billion of new funds and turf out chief executive Thorsten Heins. 

Shares in the struggling company plunged as much as 19 percent in morning trade. In early afternoon deals, the company was trading at $6.50, down more than 16 percent on Friday’s close.

Fairfax Financial, the largest shareholder of BlackBerry, had until 5 p.m. Monday to confirm its tentative $4.7 billion bid for the company, which it had announced back in September.

Reuters reported Friday the company was struggling to fund the acquisition, although the Wall Street Journal quoted Fairfax Chief Executive Prem Watsa as saying financing was not a problem.

"Over the history of Fairfax, we've never had a problem lining up financing," Watsa said.

"There was no question of us being able to raise money. After the due diligence period we didn't think was appropriate for (BlackBerry) to be burdened with debt."

Under the revised investment agreement, Fairfax will join a group of investors in a $1-billion private placement of convertible debt. 

Fairfax will buy $250 million of the debt, which will be convertible into common shares at $10 each. The placement could increase the number of BlackBerry shares by as much as 20%, hence the sharp drop in the share price on Monday. 

Heins, who took the helm of BlackBerry in early 2012, will be replaced by John Chen, the former chief executive of enterprise software company Sybase, on an interim basis.

BlackBerry did its best to put a positive spin on the announcement.

"Today's announcement represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors," BlackBerry Chairman Barbara Stymiest said in statement.

Market observers were not convinced. 

"Now we're back to the downward spiral," BGC Partners analyst Colin Gillis told Reuters.

"They've got $1 billion more cash that buys them time. The drumbeat of negativity is likely to continue."

Canaccord Genuity analyst Mike Walkley said: “Staying public was, I think, a worst case for the company in terms of turning it around.”

Blackberry has seen its market value plummet from more than $80 billion in 2008 to less than $3.5 billion as its smartphone offerings are hammered by Apple’s iPhone and other smartphones using Google’s Android operating system. 

 

http://www.globalpost.com/dispatch/news/regions/americas/canada/131104/blackberry-shares-plunge-CEO-resigns-sale-canceled