Watsa Doubles The Stakes in RIM

By Thea Neuman (Google)

Though many people think RIM has entered a death spiral, but it doesn’t scare off some optimists, like Prem Watsa. According to the regulatory filing, this billionaire’s company, Fairfax Financial, has doubled the stakes in RIM. This investment has made Fairfax the biggest shareholder of the Waterloo-based company, as it has raised its stake to 9.9%, which is above the single holding of both former co-CEOs Mike Laziridis and Jim Balsille.

In the second chief foray into the shares of RIM by Watsa (also known as the Warren Buffett of Canada), was named into RIM board when he acquired 5.12% stakes in the company.

RIM’s spokespeople weren’t available to comment on the increased stakes of Fairfax into the company.

At the Fairfax annual general meeting held earlier in 2012, Watsa launched a heartfelt defense for RIM. He reproached the media persons for thinking that the company is going down, while they all themselves used Blackberries. He also pointed attention to the fact that the company is not under debt, and is currently sitting on almost $2.2 billion. With such huge assets, no company can be called bankrupt.

As stated in an earlier post, RIM has hired some investment banks for a strategic review. While some critics believe that this move shows that Watsa is preparing for a full-scale takeover, most market observers feel that Fairfax has no such intentions.

While some people have all the faith in RIM, some companies still believe that RIM is fast losing money while it waits for Blackberry 10 launch. According to Peter Misek, analyst at Jefferies and co., this move does not change the strategic situation of the company. So unless Watsa buys the company, it makes no difference. He said that RIM is under-performing and has a 12 month target price of about $5 for each share. According to him, this move wasn’t a material event.

In the most recent news, RIM declared that it was delaying Blackberry 10 launch till 2013 first quarter. This move overshadowed the announcement of the loss of $518 million in the first quarter. Misek also says that Fairfax will get another seat in the board of directors at RIM due to its raised stakes. But this seat won’t change much, because Watsa does not have contacts in tech industry that can help RIM.

Eric Jackson, the Ironside founder said that this is not an investment that really fits into the usual pattern of Fairfax. He said that he respects Prem Watsa as a brilliant investor, but this investment doesn’t fall into his regular pattern. According to him, it might just be a move to average down the loss that he incurred in his shares in RIM. He said that Watsa lost half the value of shares in his first investment. This move might be just to average down the loss that Watsa faced. But Jackson also predicted that RIM shares will plunge further in coming months.

While analysts are making their predictions, Paul Rivett, the vice president of Fairfax, said that this investment shows that they have faith in the strategy of RIM, and things will gear up soon with the launch of Blackberry 10.