The beaten down shares of BlackBerry dropped another six per cent on Wednesday as investors weighed the likelihood of a highly conditional takeover offer from Fairfax Financial, one of BlackBerry's largest shareholders.
The smartphone maker pulled back 52 cents to close at $8.26 on the Toronto Stock Exchange, extending a downwards shift that gained momentum earlier this week.
The last time BlackBerry shares closed lower was on Oct. 31, when it ended at $7.88.
- BlackBerry takeover offer buys company time
The decline of BlackBerry stock has escalated since Monday when Fairfax proposed a tentative agreement to take the company private with a consortium of unnamed financiers for $9 per share.
The letter of intent values BlackBerry at $4.7 billion US, but allows Fairfax to walk away from the offer if it is dissatisfied with a number of conditions.
That tentative bid could become more attractive as BlackBerry continues to lose value on stock markets. Since the announcement, when shares of the company briefly spiked, its stock has fallen nearly 11 per cent.
In New York, the company's stock lost more than six per cent on Wednesday, sliding to $8 US on the Nasdaq.
Investors lose confidence in deal
The share pullback suggests that BlackBerry investors are losing confidence that a solid Fairfax deal will materialize.
A report in the Globe and Mail says that Fairfax is seeking more than $1 billion from other investors to help fund a takeover of BlackBerry, but that the Toronto-based investment firm still has a long way before it gains the support it needs.
The Globe, citing unidentified sources, said that as of Tuesday only one pension fund was seriously considering joining the Fairfax-led consortium — the Ontario Teachers Pension Plan, one of Canada's largest institutional investors.
The pension plan has declined to comment on any reports that link it to deals before they're announced.
The Globe report says Fairfax is pitching a deal that would be financed with $3 billion of bank loans, $1 billion of equity from institutions and Fairfax's current 10 per cent stake in BlackBerry, worth about $470 million.
BlackBerry earnings due Friday
Some analysts expected the Fairfax offer to drive BlackBerry's share price higher — or at least keep it steady — on the expectation that either other bidders could emerge or the Faifax deal would move forward. So far those hopes have been dashed.
"Shareholders should be very happy," wrote National Bank analyst Kris Thompson in a recent note.
"It's still a long shot that new owners can turn the company around, so shareholders should take the money and run."
BlackBerry is scheduled to report its second-quarter financial results on Friday, though it has already indicated it expects to book substantial losses on a writedown related to poor sales of its new smartphones.
Last week, the company said will likely post a loss of US$950 million to $995 million for the fiscal second-quarter. It also projected US$1.6 billion in sales, far short of analyst expectations of about US$3 billion.
A plan to cut about 40 per cent of its global workforce, about 4,500 jobs, is also underway.
With few surprises expected in the financial report, attention will turn Friday to comments from chief executive Thorsten Heins about the quarter and where the company could be headed in the coming months.