Blackberry’s Shorts Keep Getting Shorter

Blackberry shareholders could be in for a windfall if the company demonstrates initial success with its new BB10 smartphone.

| More on:
The Motley Fool

It’s been an up and down, and then up again, week for Blackberry (TSX:BB,NASDAQ:BBRY).  Monday’s news that Lenovo’s CEO indicated that he might one day consider thinking about purchasing Blackberry, maybe, sent the stock price up 13.8%, only to have it settle back 3% on Tuesday when a deal wasn’t announced.  Wednesday’s news that an order was placed for 1 million BB 10 devices, the biggest single order the company has ever received, had the stock soaring once again, this time for a gain of 8.2%.  At Wednesday’s close, BB shareholders were up 19% from where they were last Friday.

We haven’t seen any numbers about the level of success that the new BB10 smart phone has achieved, but given this week’s headlines and volatility, it seems like a good time to update a prior post that discussed the outstanding short position on the stock.

Revolutionary marketing strategy

Thus far, the media buzz surrounding the new BB10 has generally been favourable.  The big test however is going to come in the next couple of weeks when the product is finally launched in the U.S.  AT&T is expected to make the device available on March 22 and Verizon on March 28.  It will be interesting to see if Blackberry’s strategy to spend big bucks for a Superbowl ad and then launch the product 2 months later pays off.  Judging by the stock’s short position, investors are increasingly betting against a successful U.S. launch.

The light blue line in the chart below depicts the continued rise in the short position.  The current level of 147 million shares represents 28.6% of BB’s shares outstanding.  This is up from 27% when we last checked in January.

RIM shorts update Mar 2013

Source:  Capital IQ

The Foolish Bottom Line

It’s not entirely clear how many Blackberry 10’s the company must sell for shareholders to get rich.  The answer, like Blackberry’s stock, is seemingly blowin’ in the wind.  The shorts are betting on Blackberry’s demise.  If the company is able to kick and fight for longer than the shorts expect by demonstrating successful initial sales results from their new product, a massive squeeze could be on the horizon.

It’s a gamble though, pure and simple.

We have created a special free report that reveals 5 Canadian companies that are far less of a gamble than Blackberry.  Simply click here and this report will be delivered to you, absolutely free!

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

calculate and analyze stock
Bank Stocks

Better Than Banks: Why goeasy Is 1 of the Best Stocks to Buy Now

Bank stocks are typically excellent long-term investments, but right now, this growth stock is so cheap that it's one of…

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Here's how investors can turn small initial RRSP contributions into substantial savings for retirement.

Read more »

question marks written reminders tickets
Investing

Is Restaurant Brands International (TSX:QSR) Stock a Good Value Pick?

Consumer discretionary stocks like QSR could be good buys right now.

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 BMO ETFs Are Less Volatile Than BMO Stock

Two ETFs of a big bank are more suitable for risk-averse or ultra-conservative investors than its stock.

Read more »

gold stocks gold mining
Metals and Mining Stocks

3 Discounted Gold Stocks to Buy Now

Gold stocks, especially at their current discounted state, can be promising short-term investments, since they can reverse course anytime due…

Read more »

Gold bullion on a chart
Metals and Mining Stocks

Why TSX Gold Stocks Are Falling in May 2022

Will TSX gold stocks shine in the second half of 2022?

Read more »

grow money, wealth build
Investing

2 Profitable Growth Companies I’d Buy Right Now

Alimentation Couche-Tard (TSX:ATD) and Enbridge (TSX:ENB)(NYSE:ENB) stocks are cheap earnings growers that long-term investors should look to buy.

Read more »

Happy Retirement” on a road
Investing

Retirement Investors: 2 Oversold Stocks With Great Dividend Growth

Stocks with strong track records of dividend growth deserve to be on your retirement radar.

Read more »