BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares have climbed more than 50% since falling to 10 year lows in the past month. Short interest has also dropped from a staggering 150.7 million shares to 107.2 million shares as of December 31 on the NASDAQ exchange, according to a report from The Globe and Mail.
BlackBerry not going bankrupt
According to Jefferies analyst Peter Misek, “Insolvency is off the table for now so hedge funds who are short-term in nature and were betting on bankruptcy in six months have scrambled to cover [their short positions by buying back the stock]”.
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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) posted unimpressive third quarter results in December, but the company also stated that it is expecting an additional $323 million tax refund and $192 million in proceeds from land and equipment sales. According to Misek, BlackBerry has more than $4 billion of adjusted liquidity together with an almost $500-million revolving credit facility and proceeds from other sources, as well.
Analyst Neeraj Monga of VERITAS Investment Research said “with cash burn expectations clearly articulated by management… for the next little while the bias will be to upside. It is clear that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is not going bankrupt.”
Fairfax Financial Holdings has doubled its investment in a convertible debenture financing deal, which was done in November. The largest investor in BlackBerry added $250 million further to take the total investment to $1.25 billion.
The Waterloo, Ontario-based company requested a $700 million tax refund from the federal and Ontario governments to stabilize its position. Also, its deal with Foxconn Technology Group to design smartphones has given relief to BlackBerry, who transferred much of its financial risks to Foxconn Technology Co., Ltd. (TPE:2354).
Long way to go
CEO Chen has been working towards turning around the company since joining the company in November. Chen has also reshuffled the top management, hiring some of his previous colleagues from the software firm Sybase, and hiring industry veteran Ron Louks to run the device business.
BlackBerry has to mark its presence through innovation in devices if the company wants to retain its position. Chen said, in an interview held during the Consumer Electronic show that he is “abnormal” for taking the job which most of his counterparts would decline. Sales of devices are expected to come down along with high margin revenue from service fees charged to users.