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BlackBerry and the Short Sellers

NEW YORK ( TheStreet) -- If things keep up like this in the second half of the year as it has in the first half, all shorts might be dead and buried.

This has been the year when shorts have been carried out on a stretcher. Last week, it was Tesla (TLRA) -- with 44% of its float held short as of April 30 -- going parabolic in the face of solid earnings.

Then there has been Green Mountain Coffee (GMCR), with 38% of its float held short with an 83% return year to date. First Solar (FSLR) is up 66% this year, even though 33% of its float is held short. High-flying Netflix (NFLX) is up 145% this year, but it has 24% of its float still held short.

Also, the hated twins of tech Zynga (ZNGA) and Groupon (GRPN) are up 48% and 33% this year, respectively.

Even the old dogs of tech, which I would have thought would make good shorts at the start of the year, including HP (HPQ), Intel (INTC) and Microsoft (MSFT), are up 49%, 17%, and 23%, respectively.

BlackBerry (BBRY - Get Report) has 37% of its float held short. It's had a good year so far this year, too, up 34%. However, it doesn't really feel like it since most of that move happened in the first couple of weeks of the year when it rocketed up in advance of the formal announcement of the new Z10 and Q10 phones. Since it hit a peak around $18, it's traded down from there, bouncing off of $12 a couple of times.

Clearly, the shorts think the other shoe is about to drop on the BlackBerry turnaround story, and they're prepared to profit from it.

Last week, I wrote a neutral review of the new Q10 phone from BlackBerry. There were several things I liked about it and other things I didn't. iPhone is still my primary phone, but I plan to keep using the Q10 -- and I'm long Apple (AAPL) and BlackBerry.

Despite my neutral response to the phone -- which I still think is very solid and will be treated like manna from Heaven by anyone who's been using the five-year-old BlackBerrys -- I still love BlackBerry the stock. There are several positive catalysts that may occur in the coming weeks to really hurt the BlackBerry shorts just as we've seen with all the other companies mentioned above:
  • Surprise sales numbers announced at Tuesday's BlackBerry Developer Conference.
  • Surprise licensing deal for BB10 announced at Tuesday's BlackBerry Developer Conference.
  • Licensing deals for BB10 announced post-Developer Conference.
  • Strategic Investment of several billions of dollars by some larger player interested in building their mobile phone strategy around BB10.
  • Full buyout of BlackBerry by an American company (like Cisco (CSCO), IBM (IBM) or -- less likely -- HP.)
  • Good June earnings.
  • Good September earnings.
  • Good December earnings.
  • Licensing deal with one or more of the big car manufacturers for BB10.
  • Licensing deals with other smart device makers for BB10.
  • Proof of Mobile Device Management success with large orders from enterprise customers.
  • Promising results from U.S. roll-out of the Q10 later this month from AT&T (T) and Verizon (VZ).
  • Promising results from emerging markets roll-out of the planned R10 phone later in the year.
  • Upward analyst revisions from current bearish stance.


Any one or several of these events could result in a tremendous upward revision of analyst estimates as well as massive short covering, leading to a sharp Tesla-like covering of shares. There could be +10% moves in a daily session several times on any of these moves.

In a year like 2013, it wouldn't surprise me to see BlackBerry end the year over $30. It will all depend on steady sales of the new Q10s as a baseline for further good news from which to build.

At the time of publication the author was long BBRY, AAPL, GRPN and ZNGA.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.

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