Word around the water cooler this evening is that BlackBerry is mulling over the possibility of taking their talents to South Beach. And by South Beach, I mean private. This Lebronian act of business savvy can only translate into one thing: They want out of the public eye. The recent scrutiny into their lack of profit, smartphone sales slump, layoffs, and executive fallout has really put a dent not only in their stock, but their public image as well.
While just a musing in the busy mind of a busy executive, BlackBerry CEO Thorsten Heins is certainly keeping his options wide open in order to take the company back and right the ship without the picking and prodding of bulls, bears, and “indifferents” interfering with his plans and vision for the Canadian smartphone maker. I guess the BlackBerry news has been incredibly slow recently…
And on an aside, I don’t know where Reuters gets their stock photos, but who ever thought a broken BlackBerry cookie would make a great photo one day was right. Or wrong. Depending on what side of the coin you’re on. But I digress…
Let’s break down this news into a more digestible form of rumor soup.
The Pros
Return of the Shareholder
Generally speaking, when a company begins pondering a private sector re-entry, a private equity firm (or two or three) usually joins the fray. What this means is that they can now bid openly based on the company’s presumed valuation. Historically speaking, share prices usually inflate to account for added interest in the company, but they can also deflate depending on what the private equity firm is willing to divvy up for the company. This usually drives share prices higher, but that does not necessarily mean the equity firm will actually pay out the valuation of the shares due to the sudden spike in interest. And since average Joe’s like you and me can no longer hold stock, it’s up to a private firm to take hold of the company’s liquidity – also known as assuming a liquid asset – to the point where if their investment goes bust, they have enough to “sell-off” in order to recoup their losses. This is a good thing for BlackBerry and can be seen as a way in strengthening their financials and getting their books straightened up.
Now you See Me…
Once a publicly traded company becomes private, their entire business goes dark. Their books are off the record, their company no longer needs to disclose any financial information to anyone but their accountant. Gone are the days of prying eyes divulging often misleading information for the sake of influencing stock volatility for personal gain. Now, they work for themselves. The time to reinvent can be spent wisely and energy can be refocused off of deflecting comments, running interference, or pursuing an avenue that involves some sort of damage control.
Shifting Gears
All publicly traded companies must comply with certain measures of corporate governance imposed by the respective government. This means that all publicly traded companies must allocate a certain amount of resources to maintaining their compliance and legal departments. This focus may shift the importance of certain aspects of the company onto just “playing by the rules” so as to not appear on any federal radar. Allowing themselves to turn away from this standard as a private entity, BlackBerry can channel that energy into more important elements of their company and place an emphasis on actually progressing toward their collective goals as a whole.
Once you go Black…
You can really always return as a publicly traded company, assuming you can re-enter the market successfully. This takes time and a lot of finesse. But the upside here is that you can manage your weaknesses outside of the public eye and come back even stronger than before. Typically there is a 4-8 year “holding term” for an equity firm to latch on to that investment and see that it actually nets them any profit in the end. Most companies that have made (or considered making) a transition back into the private sector have been incredibly successful upon returning as a publicly traded entity. This may be the only chance BlackBerry has to actually take a leap and see if they make it to the other side, that being one filled with success.
The Cons
Why Should I Care?
Apathy is the main deterrent in these types of situations. As a company grows the goal is to generate buzz, drive share prices up, and reap the rewards of the rise of interest on a large scale. In the private market, the distractions disappear, but does this also mean the consumer will as well? Usually we are quick to measure a company’s success by the price of it’s shares and the volume traded daily, weekly, monthly, or annually. This keeps the company relevant and allows the company in question to take publicly traded money and place it in a account in order to supplement (or in some cases, support) their growth. Now that the company has turned private, will more people stop caring about the BlackBerry brand? Can this move mean the end for BlackBerry?
We Just Spent How Much?!
After investing millions or billions of dollars in their shiny new “nickel”, a private equity firm usually doesn’t want to begin hemorrhaging cash for ideas it does not believe in. In this case, after investing a lump sum into the acquisition yields a smaller budget to toss around in between the various projects. If BlackBerry wants to continue to innovate and be aggressive, they might need to stay the course rather than indicate they’re practically giving up on fighting the good fight. Investment groups that usually swing this kind of deal aren’t looking for trendy business, they’re looking for potential and growth. The stifling part is that it has to be at their pace. This can be fast or slow good or bad depending on how they see it and how it actually materializes.
Delayed? Whaddya Mean It’s Delayed?!
Long term goal setting is always the focus of companies that go private. They don’t have to divulge their quarterly results and perform audits, and spend money providing financial and legal documentation to it’s often needy and selfish shareholders. Imagine they drop every shareholder after a nice payout. The board is still together, but now they can vote internally on who stays and who goes. Less Democracy, more authority. This can backfire in many ways, with the most devastating being increases in product development timelines which may stagnate the company, especially after it has endured what BlackBerry has. With all of these pending ideas, new phones, and the incredible amount of buzz generated about the “re-branding”, this may be a nail in the coffin for BlackBerry.
With BlackBerry now considering exiting the public market and entering the private market, they may be playing with fire, or they might have just struck gold. Who’s to know, but at least we can now take a step back and see what they may have to lose, or even what they stand to gain from this possible move forward.
Source: Reuters