John Chen, CEO of BlackBerry, during an interview following the opening of his company's stock at the New York Stock Exchange in New York on Oct. 16, 2017.BRENDAN MCDERMID/Reuters
BlackBerry Ltd. (BB-T) CEO John Chen could collect more than US$200-million in compensation if recent huge gains in its share price hold up.
Mr. Chen is in his eighth year in his turnaround attempts at BlackBerry, and has seen the company’s stock rapidly rise and fall for much of his tenure. But he’s seen nothing like the frenetic trading this month: The shares have quadrupled, including a gain of 80 per cent since Friday. Retail investors in the U.S. and Canada, many participating in a Reddit forum called WallStreetBets, have swept them up in a frenzy of social-media speculation.
Mr. Chen is poised to be a huge beneficiary. When Mr. Chen renewed his employment contract in March, 2018, he received five million performance-based shares that he’d only be able to sell if the stock hit certain thresholds. He earns each block of one million shares if BlackBerry’s share price hits targets in one-dollar increments from US$16 to US$20 (its shares trade in Toronto and New York).
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He also receives a cash award of US$90-million if BlackBerry hits US$30.
Prem Watsa, BlackBerry’s lead independent director and the CEO of major stockholder Fairfax Financial Holdings, negotiated the contract, BlackBerry’s disclosures show. BlackBerry did not respond to a request for comment for this story.
When BlackBerry awarded Chen the shares in 2018, they traded at US$10.63, and the targets seemed aggressive, but achievable. BlackBerry needed to return 50 per cent to 90 per cent over five years for the awards to kick in, and the stock needed to nearly triple for the big cash award.
It looked much, much harder in November of last year, when BlackBerry traded below US$5.
However, in Monday’s trading, BlackBerry shares blew through all five price targets for the first time since the company made the award. The stock rose from US$14.04 on Friday to touch US$20.83. On Wednesday, it hit US$28.77 in intraday trading, before closing at US$25.10.
Mr. Chen can’t bank the shares just yet: The terms of the stock award require BlackBerrry to average the minimum price points over 10 days of trading. BlackBerry only began topping the minimums Monday, so Mr. Chen hasn’t qualified for any of the payouts yet.
Also, BlackBerry structured the share grant to keep Mr. Chen at the helm for the full five years: The stock “vests,” or can be sold by Mr. Chen, in five annual increments from 2019 to 2023. So even if BlackBerry shares stay up for several weeks, he can’t realize all of the gains for several years.
At Wednesday’s closing price of US$25.10, the five million award shares are worth US$125.5 million. If the US$90-million payment is triggered at US$30, the whole package would be worth US$240-million.
BlackBerry gave Mr. Chen a stock package then valued at just less than US$85-million when he signed on in 2013, and then held his pay to more modest levels – a US$1-million salary and US$2-million annual bonus – until his contract renewal in 2018. Over seven full years, BlackBerry has awarded Mr. Chen 23,684,955 shares of stock it has valued at just less than US$200-million.
Stock-sales records show Mr. Chen has sold just less than 8.6 million shares for total proceeds of US$71.7-million since 2016, including 558,003 shares he sold last November at US$4.67 apiece.
Mr. Chen and his family trusts still own just more than 15.2 million shares, including the restricted and performance stock that he has not yet earned. At Wednesday’s closing price, that total stake is worth US$382-million.
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David Milstead