Fairfax Financial Doubles Down on RIM
Research In Motion’s downward spiral has sent investors fleeing into the woods over the past year. But not Prem Watsa’s Fairfax Financial. The Toronto-based investment firm has been quietly buying up shares in the beleagured BlackBerry maker for months now, staking out an increasingly larger position. Indeed, back in January, Fairfax was RIM’s fourth-largest shareholder. Now, just seven months later, it’s the company’s largest.
According to a recent regulatory filing, Fairfax has nearly doubled its stake in RIM. Back in January, it owned 5.12 percent of the company. Now it owns just under 10 percent — 51.9 million shares, currently valued at about $356.2 million.
Why has Watsa, who’s known as the “Warren Buffett of the North,” nearly doubled his stake in a company whose value has dropped nearly 80 percent in the past year? Two reasons. Watsa, who joined RIM’s board in January, clearly figures RIM’s stock is close to bottoming out, if it hasn’t already. And he professes to have great faith in the company and its prospects for a turnaround.
“We’ve never seen a technology company with assets and talent of this calibre come down as cheap as the stock of this one has,” Watsa told the Globe and Mail. “The marketplace seems to be pricing the stock as if the company might simply close its doors shortly … It’s not like this is a start-up venture capital company. There is a world-wide following, significant capital, tremendous talent and singular focus on innovation.”
Okay. Point taken. Still, a cynic might look at Watsa’s decision to double down on RIM and wonder if he’s not positioning Fairfax to make a quick buck on a potential takeover of the company.
Watsa, for his part, maintains that this isn’t the case. “When any company gets this cheap, it could be taken over,” he said. “But we believe this is a great Canadian company with a tremendous future.”