Just over a year ago, Prem Watsa, who some say is Canada’s Warren Buffett, said BlackBerry was a “Canadian success story,” a good buy and a likely turnaround story even though its market share was tumbling. As soon as Prem Watsa stepped down from BlackBerry’s board in August, speculation that he would launch a bid for the troubled smartphone maker started to swirl, according to Reuters.
BlackBerry’s fortunes have slowly deteriorated, with the latest blow coming on Friday, when BlackBerry said it would cut more than a third of its workforce as it retreats from the consumer market in favor of its traditional strength: serving businesses and governments.
But Watsa, chief executive of Fairfax Financial Holding Ltd, which is the top BlackBerry shareholder, is an old hand at looking wrong today and right tomorrow. Speaking last year, Watsa suggested investors looking for a short-term rebound in BlackBerry might be disappointed.
“Is it going to turn around in three months, six months, nine months? No,” he told reporters. “But if you’re looking four, five years … We make investments over four or five years.”
On Monday, BlackBerry said it agreed to be acquired by a consortium led by Fairfax, both an insurance holding company and Watsa’s investment vehicle, for $4.7 billion, a move observers suggest could allow the company to put its house back in order out of the public eye.
Watsa, born in 1950 in Hyderabad, India, was trained as a chemical engineer. He has a public profile that has bordered on the reclusive since he took over Fairfax in 1985. For his first 15 years at the company, he barely spoke to a reporter, and he just started holding investor conference calls in 2001. Watsa had already shown his investment genius by selling stock ahead of the 1987 stock market crash and buying Japanese puts, which are rights to sell stocks at guaranteed prices, ahead of the Tokyo market’s collapse in 1990.
Fairfax was on the losing end of bets against the market in the mid 2000s as Watsa waited for the U.S. mortgage industry to collapse and the company’s stock fell by 50 percent between mid-2003 and mid-2006 as Watsa’s purchases of credit default swaps annihilated it’s profits, while rivals feasted on a housing-fed bull market.
However, when the market began to weaken in 2007, Fairfax began bolstering investment gains, pulling in billion-dollar profits in 2007 and 2008, and then with markets still reeling and other investors still suffering grave wounds, Watsa started to funneling money back into equities. His actions brought another strong year in 2009.
Since their 2006 low of C$100, Fairfax’s shares have more than quadrupled. Fairfax has not really been known as an activist investor, but Watsa has never shied away from a fight. He launched a $6 billion lawsuit against a group of hedge funds in 2006. They accused that group of hedge funds of conspiring to drive the company’s shares down so they could be shorted. A short position enables an investor to profit when a stock drops.
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