RIM gets vote of confidence from Watsa
Fairfax Financial Holdings Ltd. and its founder Prem Watsa doubled their stake in Research In Motion this week after the BlackBerry maker announced a new chief executive and revamped board of directors.
A filing with U.S. regulators on Friday shows that Watsa, Fairfax and affiliated companies boosted their holdings in Research In Motion by about 14 million shares in two transactions, on Wednesday and Thursday.
As a result, the group of companies that Watsa heads boosted its stake in RIM to 26.85 million shares, or about 5.12 per cent of RIM's outstanding shares.
The move comes after a top-level shakeup at the struggling BlackBerry smartphone maker last weekend, which added Watsa to its board at the same time Jim Balsillie and Mike Lazaridis stepped aside as RIM's co-CEOs.
Balsillie and Lazaridis, who are among RIM's biggest shareholders as well as the the two people most identified with RIM's past successes and failures, remain on the board of directors but they've been replaced as chief executive officer by Thorsten Heins, who has been part of their senior management team since 2007.
Watsa's move creates a powerful bloc of Canadian shareholders who together hold more than 15 per cent of RIM's stock — Balsillie, Lazaridis and now Watsa through Fairfax — possibly enough to counteract pressure from disgruntled shareholders who have been building up their holdings in the company.
Activist shareholder Vic Alboini said Watsa's bigger stake in RIM is positive and he hopes the Fairfax founder becomes influential in determining the company's future.
"Buying a bigger stake is very good because he is investing, surely, to generate a very good return," said Alboini, chief executive of Toronto-based Jaguar Financial Corp.
"I see that as positive overall for the stock," Alboini said.
Alboini said RIM's new chairwoman, Barbara Stymiest, still needs to revamp the company's board of directors with at least three directors stepping down, including Balsillie. That should take place by RIM's annual meeting in July, he said.
He repeated his call for a strategic review of RIM, which would include a possible sale of the company.
"Those are things that our supportive shareholders are most interested in," Alboini said.
Alboini said a total of 16 like-minded shareholders, including Jaguar Financial, own more than 10 per cent of RIM and are pushing for a revamped board and a strategic review of the company.
Analyst Neeraj Monga of Veritas Investment Research said Watsa's increased stake will make it harder for unhappy shareholders to push for change.
"With Mike, Jim Balsillie and other directors still behind the current management team and clearly given the revered position of Research In Motion in the Canadian technology space and Mike's position as creator of the global smartphone business — it will be very difficult for Jaguar to continue to agitate," Monga said.
"If there is longer term value to be created in that company, they have to be given the chance to create it," Monga said. According to the most recently available public information compiled by Thomson Reuters, California-based investment firm Primecap Management was RIM's largest single shareholder with about 29 million shares as of Sept. 30.
Balsillie was the second-largest number of shares with about 26.7 million and Lazaridis, who co-founded the company, was the third-largest with 26.5 million shares as of last May.
Fairfax, which had about 11.2 million shares as of Sept. 30, purchased nearly 6.5 million shares on Wednesday and another 7.55 million shares on Thursday, says a filing with U.S. regulators.
Based on Thursday's closing price at the Toronto Stock Exchange, the shares controlled by Watsa and Fairfax would be worth about $437 million.
RIM shares gained 47 cents, or 2.8 per cent, to $16.75 in noon trading Friday but remained about $1 below where they were a week ago prior, to RIM's weekend announcement introducing Heins as RIM's chief executive.
Fairfax chief legal officer Paul Rivett said RIM is a "great company" at current market prices but Fairfax has no intention of buying more shares at this time.
"For now we're going to continue to evaluate," Rivett said Friday in an interview.
Shares of RIM were in a freefall last year as it lost about 70 per cent of its market value, affected by a US$485-million charge before tax on the cost of discounting the price of PlayBooks and $50 million in lost revenues from an October service outage.
The company was already grappling with a more competitive marketplace for its smartphone devices with the emergence of Apple's iPhone and other phones that use the Google Android operating system.
RIM stock hit a high of $140 per share in 2008. By the end of 2011, its shares had traded at $14.80 and the Waterloo, Ont., company had a market capitalization of about $9 billion.
The stock has continued to lose its value on the market, falling to as low as $14.77 earlier this week after Thorsten Heins gave his first conference call with analysts since being named RIM's chief executive officer on Sunday, taking over that role from Balsillie and Lazaridis. They remain directors of the company.
Fairfax, which is primarily invested in insurance companies but also businesses in other sectors, has been increasing its stake in RIM for some time. This week's purchases come after the investment firm boosted its stake in the company by 40 per cent last September to 11.8 million shares.
Based on Thursday's closing price at the TSX, the shares controlled by Watsa and Fairfax would be worth about $437 million.