BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares were given a reasonably positive analysis from Bernstein last Monday, but new information has led Pierre Ferragu, the Bernstein BlackBerry analyst, to change his mind about the company. In a new report, Bernstein downgraded the company to Underperform from Neutral.

BlackBerry BBRY

The report concentrates on a piece of information that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has only recently made available to the public. A recent filing with the SEC showed that BlackBerry has a much worse cash position than the Bernstein analysts previously estimated. They reckon BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will burn about $2 billion in cash over the next 6 quarters.

BlackBerry Fairfax failure

The Bernstein thesis is based on the risk of the Fairfax Financial Holdings (TSE:FFH) bid for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) failing. In Monday’s report, the analysts suggested that the chance of that failure was adequately priced in. That made the stock an unattractive prospect for a short. With the new information about the company’s cash position, the chance of failure may have increased.

The new price target on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) from Bernstein is $4.50 per share. That’s the price at which the company reckons a buyout will become possible if the Fairfax bid fails. BlackBerry lost around 3 million users this quarter, according to the analysts. They expect the company to shed another 7 million users in the coming quarter.

Things are not looking good for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shareholders, and the most recent information appears to increase the chances of a Fairfax Financial Holdings (TSE:FFH) bid failing to secure financing given the new financials. The rival bid for the company may be in similar straits.

Betting on BlackBerry

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares had fallen by more than 2.5 percent on today’s market as of time of writing. The company’s business is failing and only a private bid for the firm is likely to see shareholders come away with some semblance of a return.

The Bernstein report sees costs at BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) being too sticky to reduce easily. That means that BlackBerry is going to burn cash in the coming months. With little chance of any recovery on the way, a bid for BlackBerry may have big trouble securing financing, and the company’s shareholders might be left holding near worthless securities.