Originally Posted by
morganplus8 Hi fedakd!!
Pretty complicated isn't it? There are several kinds of shorts here, some have losses, some have substantial gains, some are hedged and some are there to hold down the price of the stock while owning shares to off-set the price movement. So it is difficult to know where the trigger point is for each group. I suspect that of the 500 million shares traded since the June 28th Q1 report, a chunk of those are held in very good hands. Let's say 20% of those shares are part of a story that will unfold in the weeks ahead. The stock is held down to acquire shares for an offer, they are also shorted to setup an offer at some price above current levels. Some good math will tell you what price needs to be paid in order for the acquirer to get enough votes to take the company over or go private. In any event, it will be higher than today's price as the trading in the stock will result in a profit for someone at these levels.
I think that Prem, JP Morgan and others are doing the trades today and control the price of the stock. That's why I don't think the Q2 results in a couple of weeks means anything. They are WAY beyond those numbers knowing what they will expect from the company. This is why Prem left the board, so the board could consider all offers and make Prem's offer legal and binding. When you buy a company, you buy up all of the shares in it that are below your offer, this hasn't happened yet. A company like MSFT wouldn't do this, they are more likely to make a bid for all of the outstanding shares at a set price, this means it will cost them much more to take BlackBerry off the market than say Prem. This is why I state that Prem has first mover status, he owns a big block of stock that doesn't need to be paid for twice. All other buyers need to buy into the rally or pay a great deal more for the company.
This is also why I think the company will see a break-up in its assets as part of a deal. I don't think they can put together a partnership big enough to stop a take-over or going private. The assets are worth too much for a simple partnership to take place. The idea of a deal around $ 14 - $ 15 came about by the media because they simply applied a 40% premium to the then current price of the stock. So now you would logically apply the premium to the "current price of the stock" which is $ 16.00/shr today. What will the price be when the stock is actually halted for an offer? I think it will be much higher when that happens, let's say $ 14.00/shr.. So now you have a potential of a first offer around $ 19.00/shr plus which is where I think we are going.
This isn't Dell, they don't have the leverage to extract huge percentage gains out of their assets. Secondly, BBRY is much cheaper of a deal here. Prem and company only need to buy 455 million shares to take the company private, everyone else needs 524 million shares to do a deal. With 455 million shares and some unknown quantity held by others, Prem and his group can afford to pay you and I $ 22.00/shr and still own the company for a much lower amount on the whole. Good luck to MSFT in completing with Prem!
And so those shorts are a mixed bunch, some of them are going to lose a bundle, most won't, let's see how it plays out here!
I guess I have to make my guess as to what Q2 will look like so I had better go, thanks for the kind words my friend!