The 5 Dumbest Things on Wall Street This Week: Sept. 27
5. Blackberry's Flying Circus
Wow! Fairfax Financial
The sputtering smartphone-maker, which received a lifeline in the form of a $9 takeout bid from Fairfax Monday, added a larger plane to its corporate-jet fleet in July even as it was slashing jobs to cut expenses, according to the WSJ. The company purchased in July a 2006 Bombardier Global Express, a plane with a resale value around $25 million, not even a year after it unloaded one of its three corporate jets to cut costs. BlackBerry brass fessed up to its insanely extravagant purchase Sunday, saying it now plans to jettison all its jets to deal with its well-known financial difficulties.
Shares of the once-iconic Canadian company closed down 17% last Friday to $8.25 after reporting a second quarter loss of almost $1 billion and said it was cutting 40% of its workforce. Blackberry stock bounced back above $9 on Monday with news of the takeout offer and then drifted lower as the market wondered if Fairfax would be able to find financing for the $4.7 billion deal. Fairfax already owns about 10% of the company and has been adding to its position since 2010 when the stock was trading well above $50 a share.
Setting aside the larger question -- and it is a massive one -- as to why Fairfax CEO Prem Watsa, the so-called "Canadian Warren Buffett," keeps throwing good money after bad at this technologically irrelevant company, we still want to know why BlackBerry would be jet-shopping this summer instead of hoarding cash to save itself.
"In light of the company's current business condition, the company has decided to sell that aircraft along with the two legacy aircraft and will no longer own any planes," said company spokesman Adam Emery said in a statement.
Thanks Adam, but that still doesn't explain what Blackberry CEO Thorsten Heins was smoking when he signed off on the private plane in the first place. If he was betting on a turnaround in Blackberry's handset business, then he clearly made one foolish forecast.
Sorry Thorsten, but if you were searching for a way to look down on Tim Cook's team, buying a private jet was not it.