BlackBerry Ltd.'s stock price has fallen close to the embattled company's liquidation value, says Veritas Investment Research Corp.
On Friday on Nasdaq, shares in the Canadian technology company slipped 4 cents to close at $7.69 (U.S.). That's just pennies higher than what Veritas calculates to be BlackBerry's liquidation value of $7.59 a share.
Value is in the eye of the beholder, though, and Veritas analyst Neeraj Monga reckons that if a buyer were to keep BlackBerry running as a going concern for two years, the revenue derived would equate to $2.29 a share. Adding that estimate to BlackBerry's net asset value of $7.66 a share gives a total value of $9.95 a share, Mr. Monga said in a research note.
Fairfax Financial Holdings Ltd. said on Sept. 23 that it plans to offer $9 a share for Waterloo, Ont.-based BlackBerry.
"Some would argue that if the Fairfax bid does not close, the shares will fall to $5 – roughly equal to cash on books," Mr. Monga said. "While the immediate market reaction of a failed bid would undoubtedly be severe, we believe that distressed-asset investors could become even more interested at that point."
Veritas figures there is a 75-per-cent probability that Fairfax's offer will succeed, but the stock remains highly speculative for investors, he said.
"We believe, given our estimate of liquidation value, significant taxes receivable and a draft offer from Fairfax, that the chances of the bid succeeding are now higher," Mr. Monga said.
BlackBerry shares rose 1 per cent to $8.82 on Nasdaq on Sept. 23 after Fairfax's bid surfaced, but have declined 14 per cent since then.
If a buyer paid $7.50 a share for BlackBerry and ran the business for service division revenue for two years, and then sold for $10 a share, that buyer would realize a return of 33 per cent, according to the Veritas note.
Mr. Monga said Prem Watsa, who leads Fairfax, would likely oppose any move by the insurance and investment firm to lower its $9 bid and Mr. Watsa "would be extremely against withdrawing an offer entirely."