Blackberry Arbitrage & Equity Value

With 4 interested parties now in the game, this story is developing rapidly…

Thus, I decided to prepare my own little quick and dirty valuation of the firm (I would have done a more thorough job, but currently have a serious lack of time due to a fairly intensive MBA program). To determine the lowest possible deal value, I decided to make some estimations and calculate an adjusted book value of equity and then bring it to a per share level.

Forecasting from Blackberry`s Q2 report which was just released at the end of September, I used the trends showing from the last 5 quarterly reports to estimate current levels of Assets and Liabilities to get me to a book value of equity. Taking relatively large deductions for depreciation and writing down 20% of intangible assets allowed me to get to the conservative estimate of $11.50 per share. This is my current price target for Blackberry, and I think the bidding is likely to get to this level. I could also see a much higher offer being made, especially once synergies are taken into consideration.

Disclosure: I opened a long position on Blackberry with options earlier this week in order to take advantage of this arbitrage opportunity. I plan on adjusting this position (buying or selling) as more news come out.