BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is looking to be bought by a consortium led by Fairfax Financial Holdings Ltd (TSE:FFH). The deal will give $9 per share to investors if it comes to pass, but there are obstacles that might thwart the agreement. A new report takes a look at some of the factors that could destroy the deal, and what price investors should be paying given the level of uncertainty.

BlackBerry BBRY

The BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) deal has a couple of opportunities to be cancelled. Fairfax Financial Holdings Ltd (TSE:FFH) might find something it doesn’t like during due diligence, regulators might have a problem with the deal, or an activist might get involved. The first two seem unlikely—Fairfax has been at BlackBerry for a while and has seen the books. The third could happen but would likely be a net positive for shareholders.

Valuing uncertainty at BlackBerry

The most likely blockage to the BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) buyout would be the cost of financing the deal. If the consortium is not able to get money at a low enough rate it will not be able to complete the deal. For Pierre Ferragu of Bernstein Research, this implies a 75 percent chance of success. Investors did not price in the correct chance of failure when the deal was announced and shares shot to $9.

They are pricing in that risk now, however. Ferragu thinks that the correct price for the shares is around $7. The market is getting closer to that price today and Ferragu is happy enough to put the company on Market Perform. If the deal does not succeed, Ferragu thinks that there is only about a 13 percent downside to the current price in the short-term.

The future of BlackBerry Ltd

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is not the healthiest company on the market. The Bernsten report takes a look at the company’s prospects as it heads toward a future of complete restructuring. The projection is not as bad as it could be. Ferragu doesn’t think the company will burn a lot of cash in the medium term and that means that the firm will likely survive long enough to turn itself around.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is in trouble, but not all that much trouble. Bernstein calls its current business a “strategic dead end.” BlackBerry needs to change, but that doesn’t mean death is around the corner.