4 Reasons Why BlackBerry Shareholders Should Be Angry

There have always been governance concerns at BlackBerry, but what has unfolded these past few weeks has been particularly outlandish.

| More on:
The Motley Fool

BlackBerry (TSX: BB, NASDAQ: BBRY) shareholders should be angry. Not because the once-beloved Canadian icon is on the verge of collapse. That’s just business. Rather, it’s the golden handshakes, lavish spending, and fading transparency that has surrounded the company these past few months. Here are four reasons why shareholders have gotten a raw deal.

1. Corporate executives spent lavishly at your expense
According to a report in The Wall Street Journal, BlackBerry added a large private jet to its corporate fleet only two months before the company announced that it would cut 4,500 jobs and post a $1 billion loss.

Based on filings in Canadian aircraft registry records, the company purchased a 2006 Bombardier Global Express in July. In the company’s marketing material, Bombardier describes the aircraft like so: “Cruising majestically through the sky, Bombardier’s Global aircraft is the performance benchmark in the ultra-long-range jet category. This jet was purpose built to fulfill the desires of the most sophisticated and demanding business travelers without compromise.”

Although the price paid for the jet wasn’t disclosed, The Wall Street Journal reports that similar planes are listed for sale between $25 million to $29 million on a used aircraft marketing website.

2. Management hasn’t been transparent
As BlackBerry’s fortunes declined, management’s transparency has taken a noticeable turn for the worse.

In June, BlackBerry stopped disclosing subscriber figures through its earnings press release. The company claims that BB10 devices generate less service revenue and therefore subscriber figures were less reflective of business performance. But perhaps it had more to do with the fact that the company had lost 8 million subscribers in the past year.

Then last week, BlackBerry opted to skip its call with analysts and investors in light of the letter of intent agreement between BlackBerry and Fairfax Financial Holdings (TSX: FFH).

BlackBerry has promised to publish further details regarding its second-quarter results in the Management’s Discussion and Analysis and consolidated financial statements this week. However, investors won’t be given any opportunity to voice their concerns to executives.

3. Thorsten Heins’ $55 million golden parachute
According to a report from Reuters, only months before Fairfax’s bid for BlackBerry, Fairfax Chief Executive Prem Watsa played a role in securing a golden parachute worth as much as $55 million for BlackBerry boss Thorsten Heins.

Based on company filings, if Heins is terminated due to a change in ownership of BlackBerry he will receive $3 million to in base salary, $4.5 million in performance bonuses, and $48 million in equity grants. Watsa’s role in deciding Hein’s compensation is raising eyebrows amongst pay experts.

4. The breakup fee will deter higher bidders
And based on a great report from Bloomberg News, BlackBerry agreed to pay Fairfax Financial a rare breakup fee for a tentative takeover offer. Should BlackBerry back out of the tentative agreement or find a higher bidder, the company will owe Fairfax a fee of about US$157 million.

It’s highly unusual that a seller grants a breakup fee to a buyer with no committed financing. According to the Bloomberg report, this termination fee is about 5.6% of the deal value, above the average breakup fee of 3.5% for U.S. companies in 2012. Most alarming for shareholders, the breakup fee could deter any rival suitors from bidding for the company.

Foolish bottom line
There have always been governance concerns at BlackBerry, dating back to when the company was run by co-CEOs Jim Balsillie and Mike Lazaridis. But what has unfolded these past few weeks has been particularly outlandish. It’s a raw deal for shareholders.

The Motley Fool’s top two stock ideas
The Motley Fool Canada’s senior investment analyst just unveiled his top two stock ideas for new money now. And YOU can be one of the first to read his buy reports — just click here for all the details.

Disclosure: Robert Baillieul has no positions in of the stocks mentioned in this article.

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

thinking
Dividend Stocks

Should You Buy BCE Stock for its 8.6% Dividend Yield?

Down over 20% from all-time highs, BCE stock offers you a tasty dividend yield in 2024. But is the TSX…

Read more »

grow dividends
Tech Stocks

Why Nuvei Stock Jumped 26% on Monday

Nuvei (TSX:NVEI) stock saw shares surge today as the company confirmed it's in talks to go private through a buyout.

Read more »

consider the options
Investing

Better Buy for the Dividend: Enbridge or Nutrien?

Enbridge (TSX:ENB) and Nutrien (TSX:ENB) are great dividend plays for new investors going into April.

Read more »

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

grow dividends
Dividend Stocks

How Long Would It Take to Turn $20,000 Into $100,000 With TSX Dividend Stocks?

Here's how high-quality TSX dividend stocks and the power of compound interest can help grow your investments by 400% or…

Read more »

Happy diverse people together in the park
Tech Stocks

A Once-in-a-Generation Investment Opportunity: Artificial Intelligence (AI) Growth Stocks

Canadian tech companies like Kinaxis (TSX:KXS) are doing big things in AI.

Read more »

Paper airplanes flying on blue sky with form of growing graph
Dividend Stocks

2 Soaring Stocks I’d Buy Now With No Hesitation

These two stocks may be the most expensive on the market, but they're high for a reason! And I'm still…

Read more »

Arrowings ascending on a chalkboard
Investing

This Canadian Blue Chip Is Trouncing TSX Returns, and It Still Has Room to Run

Alimentation Couche-Tard (TSX:ATD) stock looks quite frothy heading into earnings, but there may still be upside.

Read more »