Considering Our Options – Oh $BBRY, I Wanna Get Wit’cha

by CC February 25, 2015 3:30 pm • Commentary

Earlier today Blackberry shares spiked on this press release:

BlackBerry Limited, a global leader in mobile communications, announced today that the Company is working with Google to enable BES12(TM): a cross-platform EMM solution by BlackBerry(R) to manage devices equipped with Android for Work, Google’s solution to securely separate business and personal data and applications.

It was up more than 5% at one point and now is up a little more than 3%. This is increasingly looking like the best options for BBRY as a company, partnering with Android and iOS ecosystems to provide some of the things that BBRY does best. Ultimately, they probably need to do even more than that as their handset business goes the way of Palm, but for now these deals highlight just how valuable their software is. Here’s another example last year from ZDnet which apparently still exists:

BlackBerry have had a long-standing partnership on QNX as a way to connect iOS to in-car systems.

In many respects, QNX serves as a middleware layer for in-car infotainment. News surfaced last week that Apple’s CarPlay, which launched with iOS 7.1 on Monday, was based on QNX.

With that kind of proprietary technology in demand by the big players, one of them scooping BBRY as an exclusive is always on the table.

We’re long deltas in BBRY in the form of a June call spread:

TRADE:  BBRY ($10.20) Bought June 11 / 15 Call Spread for .75

-Bought 1 June 11 Call for 1.10

-Sold 1 June 15 call at .35

This is essentially a “where there’s smoke there’s fire” trade as there’s always rumors swirling around the company. Eventually it probably happens but you have no idea at what price. Therefore, a slightly out of the money defined risk call spread, the one we placed is the best way to play these types of stories

Right now our trade is a slight winner mark to market but we’re unlikely to make any adjustments to the trade or take any small profits off the table anytime soon. Eventually this stock has a chance to break out for real on another round of rumors. That’s why we’re there.




New Trade $BBRY: Berry Possible


Shares of Blackberry (BBRY) have had a wild 24 hours after yesterday’s Reuters report that Samsung had approached BBRY about a possible takeover, per Bloomberg:


The stock rallied 30% yesterday increasing even after the market closed until the company issued a statement denying any takes with Samsung.  The stock is down 20% today, holding onto a bit of yesterday’s gains:

BBRY 2 day chart from Bloomberg
BBRY 2 day chart from Bloomberg

The stock has been on our radar since early December, after inking a deal with Samsung to provide security solutions for its enterprise Android devices.  This was our take on December 4th:

BBRY has a $5.6 billion market cap, $2.7 billion in cash, and $1.5 billion in debt. When you put the net cash together with their patent portfolio that some view as being worth between $1 and $2 billion and their enterprise network which is worth maybe $1 billion the stock looks cheap.


for those who happen to be long or want to be long we suggest a stock alternative to long stock. The Feb 10 calls are reasonable vol and can be bought for around 1.35. That’s a break even just .85 above where the stock is trading which isn’t great but it’s not terrible considering that you have unlimited upside above that (if it goes higher it’s probably a lot higher or why be n the stock) and you’ve defined your risk much better to the downside. We’d rather own those calls than the stock here.

So what now? …

As you know, while I am a tad to skeptical when it comes to situations like this I am also willing to take a shot on “where there is smoke there is likely fire” stories.

I reckon the sum of the parts equation just got a little bump, and with a market cap of $5.4 billion, $2.7 billion in cash, and $1.65 billion in debt, if the company was able to get back in the black and actually grow sales again, there may ultimately be that allusive bidder for the most valuable parts of the company as they diversify away from hardware.

At this point the stock looks like its reached a sort of equilibrium. The company recently reported earnings in mid December, held an analyst day in November, was front and center at CES in Las Vegas and has been the focus of takeover rumors. Despite all that it’s right back at the mid point of the six month range.  The short interest at 27% is also worth noting. making moves like yesterday that much more likely.

So here’s the lotto ticket playing for more rumors if not something tangible in the next few months:

TRADE:  BBRY ($10.20) Bought June 11 / 15 Call Spread for .75

-Bought 1 June 11 Call for 1.10

-Sold 1 June 15 call at .35

Break-Even on June Expiration:

Profits:  between 11.75 and 15 make up to 3.25, max gain of 3.25 above 15

Losses: between 11.75 and 11 lose up to .75, below 11 lose full .75

Rationale:  This idea is a bit speculative, as the company has been picked over for years by potential acquirers and none seem interested. So for this trade to work will either need a full on turn around in their business, which I highly doubt, a breakup of the company or sale of the patent portfolio, or an all out takeover.  This is the sort of trade where I am going to risk what I am willing to lose, as I do not believe in the company’s product portfolio or strategy but think the parts are likely worth more than the existing public market valuation and the assets inside a larger company like Samsung could be a whole heck of a lot more valuable.