BlackBerry – No rabbit

I suspect that Fairfax has no rabbit to pull out of the hat.

• Close of US business is the deadline by which Fairfax must firm up its $4.7bn ($9 per share) bid to take BlackBerry private.
• So far no partners have been announced and it looks very likely to that no commitment for financing has been signed.
• I suspect that there are two reasons for this.
  • First. The valuation at which Fairfax agreed to buy BlackBerry looks way too high to anyone except a BlackBerry shareholder.
  • I have valued BlackBerry at $6.32 per share in the best instance (see here).
  • Second. Since what must have been the worst profit warning in its history (see here), there has been a systemic loss of confidence in BlackBerry as a going concern.
  • This basically means that most enterprise customers are now looking for alternative solutions.
• Blackberry has been flying around the world looking for a buyer in the last few weeks but no one has any real interest in buying the company as a whole.
• There has been interest around BlackBerry Messenger and the patent portfolio but no one seems to want the handset business.
• Asian vendors looking to make a splash in the handset market like Lenovo will remember only too well the cataclysm that was BenQ’s take-over of Siemens’ handset business and will be extremely cautious.
• Microsoft has all the assets (through Nokia and its own enterprise business) it needs to steal all of BlackBerry’s existing customers and so I see no reason why it would encumber itself with an asset that can add no value to it.
• Consequently at 5pm (EST) tonight, I suspect that Fairfax is going to have to admit that its bid has been all talk and no substance.
• This will leave BlackBerry once again in the lurch and prey to the circling vultures looking to pick off the plumb assets.
• It is Fairfax’s bid that has kept BlackBerry shares from plumbing new depths and I would expect a downwards move of at least 20% in after-hours trading.
• For anyone unlucky enough to be still holding stock, there is only one rational action before the close of trading today.