I've been bearish on the company and would have saved investors anywhere between 30% to 50% by suggesting to avoid the stock. Here are just a few of the headlines:
I was pondering the idea from a trading perspective -- because no way does it make sense from an investing perspective -- of buying a stock this beaten and this battered. Admittedly, for as much hate as I tossed on BlackBerry and its recently ousted CEO Thorsten Heins, the company does have value. It carries no debt and has $2.34 billion in cash on hand. The software side of things also has value. But the first thing that should come to most investors' mind is the cash level. Many are asking themselves, at what point does the stock trade at cash levels? In BlackBerry's case however, that might be the wrong question to ask. Several months ago, that level was here, near $6 and change. It was also before the company burned through nearly $500 million last quarter, which was revealed in its most recent earnings report. What a ridiculous amount, roughly equivalent to 20% of its cash on hand. Adding to the cash burn, an additional $400 million is expected to go toward restructuring efforts. Like what happened with its PlayBook tablet, the company wrote down nearly $1 billion in inventory, mainly attributed to the Z10 smartphone. You remember, the Z10 that was supposedly going to save the company. When news surfaced several months ago that Fairfax Financial would be willing to take BlackBerry private at $9 per share, it was obvious the market didn't believe it. Why? Simple, the stock traded well below that $9 mark. Although the company was accepting buyout bids until Nov. 5, no one stepped up to the plate.
As the deadline approached, Fairfax's bid fizzled into dust and suddenly BlackBerry was left with no buyers. It responded by launching a $1 billion convertible debt offering. I'm not breaking any news. This is all public information. However, I am serving as a public bulletin of sorts, to remind investors to be wary. Sure, selling some puts or taking a small stab on the common stock at these levels might pay off decently.
But is the risk justified? For some people, maybe it is. But for me, personally, I don't like it.
Shares of BlackBerry have continued to go lower every time investors thought they had bottomed. Presently, it can't sell a damn thing and is burning through cash like it's the company's heating system. I'm not suggesting the company is going bankrupt and the stock is headed to zero. But nor am I suggesting the stock will double because it's now so cheap and undervalued. If no other big-name tech company or private-equity firm wants it, then neither do I. If I have to buy stocks, I'd rather add to some of my quality long-term holdings or even stay in cash to await a better situation.
Has BlackBerry bottomed? It very well might have, or might be soon. But in my opinion, let the others find out for themselves. As tempting as it may be, don't be the one trying to catch the falling knife.
At the time of publication, the author had no position in any stock mentioned.
-- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV