Sometimes I can't help but wonder if BlackBerry Ltd (NASDAQ:BBRY)'s pain will ever end.
On Monday, shares of the beleaguered smartphone maker closed at $7.95 per share, less than six years after the stock hit its peak above $144 per share in 2008.
And that's also despite the fact that, a little over a week ago, BlackBerry announced it had signed a letter of intent to be acquired for $9 per share by a consortium of investors led by Canadian insurer, Fairfax Financial Holdings Ltd (PINK:FRFHF), which so happens to be run by renowned value investor Prem Watsa.
Blood in the streets The timing of the deal was notable, especially considering BlackBerry had just pre-announced selected earnings results, which, in turn, drove the stock down by 17% to close the previous week at just $8.82 per share. But despite that buyout offer, shares of BlackBerry have continued to fall amid doubts the acquisition will go through.
After all, he's often called the "Warren Buffett of Canada" given his penchant for making the most of beaten-down assets -- and its no mystery I respect Mr. Buffett -- so I was inclined to take Watsa seriously when he defended his bid last week, saying:
We've got a track record of 28 years of completing what we've done. We've never renegotiated. We thought long and hard before we offered $9 dollars a share and we're not in the business of offering a number and at the last minute changing the figure. Over 28 years our reputation is stellar on that front. We just don't do that.
Of course, I can understand investors' nervousness considering Watsa, who already owns 10% of the company at an average cost basis of $17 per share, hasn't identified the remainder of the buyout group or obtained committed financing for the deal.
What's more, Watsa gave himself a full six weeks to allow for adequate due diligence, saying a final offer will be presented by November 4. That gives investors plenty of time to continue worrying the deal will fall through.
A level head during turbulent times But more encouraging, however, were Watsa's level-headed, Buffett-esque comments on BlackBerry late last week :
The market's very emotional. You'll find huge optimism when everything's going well, huge pessimism when things are not working out as well. And what we say is the truth is in between. If you read the press and you read these analysts, it looks like [BlackBerry] is going bankrupt. And five years ago it looked like RIM controlled the world. And both views are wrong. It wasn't one, we found out, and we're suggesting to you with humility that the second one is wrong.
What's more, Watsa has already stated he has no delusions BlackBerry has any hope of competing over the long term in the consumer market. Rather, he says, it's BlackBerry's world-class enterprise solutions they're after -- and you can bet that's factored into his offer.
Now, Watsa says, their task is to do their due diligence "to figure out what's needed to finance it over the long term, and then [raise] the money to have a capital structure that will help the company over the long term. We want BlackBerry to survive for a long time."
Notice, Watsa didn't say he was completing his due diligence to determine whether he actually wants to buy the company. Right now, he simply needs to confirm that they'll raise enough capital to ensure BlackBerry will have what it needs to get back on its feet and refocus entirely on the enterprise market.