In a significant turn of events, Fairfax Financial Holdings Ltd. has divested its entire stake in BlackBerry Ltd., marking the conclusion of a 16-year partnership that has ultimately proven unprofitable. This decision comes at a time when the Canadian technology firm is experiencing renewed interest in its automotive software division, potentially signalling a pivotal moment for BlackBerry.
Fairfax’s Departure from BlackBerry
Fairfax, headquartered in Toronto, disclosed in a recent U.S. regulatory filing that it no longer holds any shares in BlackBerry. Once a major player in BlackBerry’s shareholder landscape, Fairfax’s holdings peaked at 46.7 million shares, which it accumulated over the years. However, by early May, this number had dwindled to 26.26 million, and the company has since sold off its remaining shares. Fairfax’s decision to exit comes after a prolonged period of decreasing value, raising questions about the long-term viability of BlackBerry in the competitive tech market.
Prem Watsa, the CEO of Fairfax, has chosen not to elaborate on the investment’s performance, which has been nothing short of disappointing. Fairfax had previously owned approximately 8 per cent of BlackBerry’s stock and possessed rights to convert a series of debentures into equity, but these rights were never exercised.
A Costly Investment
Watsa’s reflections on the BlackBerry investment have been candid. In his 2024 letter to shareholders, he described the venture as “another horrendous investment by your chairman.” Fairfax initially invested around US$882 million in BlackBerry shares at an average price of US$17.16 each. However, the stock has largely failed to reach those levels since early 2012, with only brief spikes driven by market speculation in 2021.
Calculating the losses reveals a stark picture. Based on the timing of their sell-off, Fairfax likely faced a minimum loss of US$288.5 million, and with the lower sale prices, the actual losses were probably even more severe. This unfortunate investment has compounded upon previous losses from earlier share sales, bringing the total loss to over US$124.5 million.
The Opportunity Cost
Watsa highlighted the stark contrast between the returns from BlackBerry and those from tech giants collectively known as FAANG—Facebook, Amazon, Apple, Netflix, and Google. Had Fairfax invested the same capital in these companies, the returns could have multiplied significantly, illustrating the substantial opportunity cost incurred by choosing BlackBerry over these tech behemoths.
Despite these setbacks, Fairfax’s overall performance remains robust. As of June 30, the company reported total assets of US$109.1 billion, with Fairfax shares appreciating 311 per cent over the past five years. This resilience suggests that while the BlackBerry investment may have faltered, Fairfax continues to perform well in other areas.
BlackBerry’s Current Landscape
BlackBerry’s journey since Fairfax’s initial investment has been tumultuous. The firm was once a leader in the smartphone market but struggled to adapt to the rapid evolution of technology brought on by competitors like Apple and Android. Fairfax’s increasing stake in the company came with optimism, especially during the appointment of turnaround specialist John Chen as CEO in 2013. However, under Chen’s leadership, BlackBerry made significant cuts and shifted focus towards cybersecurity, a move that has had mixed results.
Recently, BlackBerry has seen a revival under new CEO John Giamatteo, who has implemented cost-cutting measures and refocused the company’s strategy. The cybersecurity division has shown promising growth, benefiting from heightened demand in light of global geopolitical tensions. Additionally, BlackBerry’s QNX embedded software division, which powers millions of vehicles, has reported a 26-per-cent increase in revenue, suggesting a potential future growth trajectory.
Why it Matters
The exit of Fairfax from BlackBerry underscores the volatile nature of technology investments, particularly in a landscape where rapid innovation often outpaces established companies. Watsa’s experience serves as a cautionary tale for investors regarding the risks associated with backing companies that may falter in adapting to market trends. As BlackBerry navigates a challenging recovery, the implications of Fairfax’s departure could resonate throughout the tech investment community, highlighting the need for strategic foresight and agility in a fast-evolving industry.
