BlackBerry Ltd Plans Buyback, Believes It To Be The Right Time

BlackBerry announced plans to buy back 12 million shares on Thursday, says a report from Reuters. Following the news, shares of the Canadian firm were up by around 2% in the extended trading session.

Why Chen wants to do buybacks

The main objective of the repurchase program, according to BlackBerry CEO John Chen, is to “offset dilution that may result from our proposed employee share purchase plan and from proposed amendments to our equity incentive plan.”

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Chen believes it to be the right time to take advantage of the company’s strong cash position by repurchasing shares as the company’s current value does not “reflect what we view to be the underlying value and future prospects of our business.”

It’s been almost a year since BlackBerry repurchased any of its outstanding securities. The Canadian firm said it will come up with a new employee share purchase program and will also offer an equity incentive plan at its annual meeting scheduled next month. If its proposal is rejected by shareholders, then the company, which has been struggling to compete with other smartphone makers, will abandon its repurchase plan.

BlackBerry plans to repurchase around 2.6% of its outstanding public float on the NASDAQ or the Toronto Stock Exchange, depending on the approval. As per Thomson Reuters data, the Canadian company had a free float of 502.8 million shares as of May 10. If calculated at Thursday’s closing price of $10.27, the repurchase plan will amount to $123.24 million.

BlackBerry CEO compensation drops sharply

Separately, the compensation package for Chen is down significantly in 2015. This decline is largely due to the fact that the CEO has not gained from the restricted shares he was allotted last year as an incentive to lead the struggling smartphone maker.

According to a regulatory filing, Chen’s compensation in fiscal 2015, which ended Feb. 28, totaled $3.4 million, compared to the $85.8 million he received in fiscal 2014. Chen’s fiscal 2015 compensation includes a base salary of $1 million and $2.4 million in other incentives. Chen, who joined BlackBerry as CEO in November 2013, is working to diversify the company with an objective to double software revenue to $500 million by next March.

Year to date, the stock has fallen 6.5%, compared to a 3.5% gain in the S&P 500.