Blackberry is looking at buying back 2.6% of its outstanding shares equivalent to 12 million shares in an effort to take off the new employee share purchase program.
Ontario based BlackBerry Limited (BBRY, Financial) announced its plan to buyback and cancel a total of 12 million of its shares equivalent to 2.6% of its public float as it requires to kick start a new employee share purchase plan. This plan will be presented for approval in the company’s annual general meeting to be held on June 23, as it will propose to increase the shares available as compensation for the employees. Investors welcomed the news alike as the shares of the company went up 2.7% in the late trading.
Problems at Internal Level
Founded in 1984 as Research In Motion Ltd. (RIM, Financial), the Canadian telecommunication and wireless equipment company came to be known as Blackberry soon after due to the resemblance of its keys to the druplets of the blackberry fruit. The company is known as the developer of the BlackBerry brand of smartphones and tablets as well as provider of secure and high reliability software for industrial applications and mobile device management worldwide.
The company was undergoing a lot of pressure internally. A number of its top employees had resigned from their position last year including Jeff Gadway who was the director of enterprise product marketing and Alec Saunders who was vice president of the QNX unit. Even the current employees couldn’t be appeased well as the grant of restricted shares couldn’t be sufficient for Chief executive John Chen to reap benefits. His pay package as a result fell drastically in fiscal 2015 ending February 28th to $3.4 Million as compared to $85.8 million in fiscal year 2014 among which about $1 million was earned through restricted shares spread over 5 years since Mr. Chen’s appointment in the company in November 2013. Through the share buyback, the company intends to the number of share sit is currently offering under the equity incentive plan. This will partly help its employees leverage more from the shares incentives.
Plan ahead
The company hasn’t made a repurchase in the last 12 months of any outstanding securities. Not only internally, but the company is also struggling in the market in the presence of some of the popular smartphone brands, hence the approval of the plan by the shareholders is of utmost importance for the company right now or else it will have to let go of the repurchase plan. If approved, the company plans to make the buyback from either the Nasdaq Stock Exchange or the Toronto Stock Exchange. The company had recorded a free float of 502.8 million shares as on May 10th as per data compiled by Thomson Reuters.
This year, shares of Blackberry have fallen almost 6.5% so far to $10.27 due to inability of the company to raise its software sales. Post the appointment of Mr. Chen; the company has seen a lot of ups including a goal of doubling its software revenue to about $500 million by March.
The buyback of 12 million will be equivalent to almost $126 million. As of now, the company has $3.27 Billion in hand recorded at the end of February quarter and has approximately $1.7 Billion in long-term debt.
