BlackBerry Isn't Private Yet, So Are Shares Ripe For Picking?

Chris Lau, Kapitall: BlackBerry may not be a publicly traded company for long. Here's what to consider while shares might ripen.

BlackBerry ( BBRY ) is supposed to be privatized in a $4.7 billion deal. Yet the market is evaluating the risk associated with financing Fairfax Financial’s purchase, and some analysts are looking to the downside.

[Read more from Kapitall on BlackBerry: BlackBerry Goes Private: 3 Other Tech Stocks to Consider]

This may explain why the stock has been trading around $8 instead of the $9 offer price:

Click on the interactive chart below to see data over time. 

But the company, and investors, have some bright spots to look forward to between now and the tentative closing date of the sale in November.  The first is the release of the Z30 smartphone, which will include:
  • Power from a Qualcomm (QCOM) Snapdragon S4 Pro processor.
  • Run time supported by a 2,880mAh battery.
  • Graphics on a 5-inch Super AMOLED display.
  • And 16GB of storage space.

The device will be available first in the Middle East and UK, where it is priced at £529 ($857) without a contract.

Investors could also consider the steep discount on the flagship Z10 device as a positive. BlackBerry already recognized its inventory has been difficult to sell, and this can benefit consumers. In India, the Z10 is now selling for US $280 (Rs 29,600) without a contract.

Ironically, BlackBerry could cannibalize sales of the premium Z30 device by making the Z10 so inexpensive in its core market. In the United States, an unlocked Z10 is available from BlackBerry’s online store for $449.

BlackBerry also wrote off $934 million in inventory in its second quarter earnings report this year. Despite shipping 5.9 million smartphones during the quarter, only 3.7 million devices brought in recognized revenue from sales through to end customers

The next few weeks could still be rocky for BlackBerry shareholders. The US government has come to a standstill, which can have a knock-on effect on government contractors and suppliers like BlackBerry.

Read more about what’s happening in Washington: Keep Calm and Invest On: 4 Stocks to Survive the Government Shutdown

BlackBerry is still set to release BB 10.2. After a leaked release, some see improvements to the company’s operating system. Inline message replying is now supported, which will appeal to consumers who use the device primarily for messaging.

The impact on the takeover itself is another issue to consider. The latest updates suggest the beleaguered smartphone maker could grow its relevance as a private company in the corporate space. Whether public or private, investors will have to decide if BlackBerry is ripe for picking.

 

Written by Chris Lau, Kapitall contributor. Price data sourced from Zacks Investment Research.  Disclosure: Author has a long position in BlackBerry shares.​

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