In less than 24 hours, shares of BlackBerry Ltd. (TSX:BB)(Nasdaq:BBRY) jumped almost 30%, but within a few hours it erased all those gains. For those that missed the fun, this happened on January 14-15 on media reports that competitor Samsung Electronics Co. Ltd. approached the company for a takeover offering worth about $7.5 billion.
However, within a few hours, BlackBerry CEO John Chen and Samsung denied the rumours that the companies were in talks.
After the denial, BlackBerry shares erased its overnight gains and on Friday settled down to around $12.26.
There are two things important about this event that investors must remember:
- This is not the first time such rumours have emerged. This is about the fifth time (at least) that there’s been buzz about takeover talks between the two companies. There were similar rumours in early 2012. But this may not be the last of it. Just because both companies denied being in talks, it does not mean they never were. There are several reasons Samsung could want BlackBerry, the main one being security.
- Such volatility in turnaround stories is expected and in fact, normal. At the end of last year, I wrote about expecting this kind of volatility in BlackBerry shares. Investors should not jump at such events but instead take time to assess the impact of the news.
Even though BlackBerry shares erased all their overnight gains, investors shouldn’t be worried about the company or its share price. At The Motley Fool, we are all about long-term investments and growth, rather than making a quick buck. And I firmly believe this will be a good year for BlackBerry for several reasons.
With John Chen at the helm, the company has outperformed every critic’s expectations. Mr. Chen has reassured shareholders that the company is a quarter or two away from being profitable, and by the way things are going at the BlackBerry headquarters, I don’t doubt that. The company has been cutting costs and even reported a positive cash flow of $43 million for the previous quarter. There is still a long way to go and several loose ends to tieup, but the company seems to be on the right track.
Investors should stay calm and expect volatility with this company, instead of having a knee-jerk reaction to any big price movements. Try to keep the big picture in mind and look for opportunities to buy into the stock when levels are low.
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.
Fool contributor Sandra Mergulhão has no position in any stocks mentioned.