BlackBerry was hoping for a rescue from its biggest shareholder by a Monday deadline, but the deal did not take the form investors were hoping for and the device-maker’s stock price plummeted once again.
The smartphone company will receive a $1 billion investment from Prem Watsa’s Fairfax Financial and other parties, in the form of convertible debentures, a loan that can be converted into stock down the road if a recovery takes shape.
Under the terms of the transaction, the $1 billion investment, which has a seven-year term, can be converted into BlackBerry common stock at $10.00 per share. If that comes to pass the investor group would own approximately 16% of the company.
The latest bid to save BlackBerry will come under new leadership though, as Monday’s announcement included the ouster of Chief Executive Thorsten Heins. The company announced former Sybase CEO John Chen, who is taking over as executive chairman, will serve as interim CEO. Watsa will be appointed lead director and helm the board’s committees on compensation, nominations and governance. will become interim chief and take over as chair of BlackBerry’s board.
The unsecured subordinated debt Watsa and his group are buying carries a 6% coupon, and provide significant upside if the stock price recovers though at the moment the $10 conversion price is substantially above the prevailing market price.
Shares of BlackBerry were already reeling with skeptics doubting the tentative $4.7 billion deal for Fairfax to buy BlackBerry at $9 per share. After the financing for that transaction proved elusive, shares dove 11% to $6.88 Monday morning.
Speculation about the company’s fate have dominated headlines in recent months. Just this weekend reports that Chinese PC giant Lenovo was thinking about acquiring BlackBerry for $5 billion picked up steam when Lenovo’s CEO remarkedabout entering mobile. Last month news broke that BlackBerry co-founders Mike Lazaridis and Douglas Fregin had filed paperwork with the SEC seeking toregain control of the struggling company.
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