Fairfax set to gain $1.16B as BlackBerry shares skyrocket

Day traders have pushed BlackBerry Ltd.’s share price to levels not seen in more than nine years. They’ve also given a jolt to a Canadian investment company that got crushed in last spring’s market crash.

BlackBerry soared 32.6 per cent to close at $25.10 (U.S.) Wednesday in New York after a brief trading halt. The stock reached its highest level since 2011, and is up about 300 per cent this year.

That is repaying the patience of Prem Watsa and his Fairfax Financial Holdings Ltd., which owns 8.3 per cent of the software firm’s shares, according to data compiled by Bloomberg.

Once the toast of the mobile tech world, BlackBerry failed to keep pace with competitors including Apple Inc. and the stock lost most of its value in 2010 and 2011. Around that time, Watsa began building a large stake, which also includes convertible debentures with a conversion price of $6 each that could be turned into 55 million shares.

The run-up in BlackBerry shares this year would drive a pre-tax gain of about $1.16 billion for Fairfax in the first quarter, Phil Hardie, a Torontobased analyst at Bank of Nova Scotia, told clients in a note before markets opened on Tuesday. Hardie upgraded his recommendation on Fairfax’s shares to a buy-equivalent.

Fairfax closed at $488.94 (Canadian) on Tuesday. With a 1.8 per cent gain as of Wednesday’s close, it’s the best-performing financial stock in the S&P/TSX Composite Index this year after being one of the worst in 2020 with a 29 per cent drop.

Fairfax didn’t respond to a request for comment.

Watsa has been waiting for such a payoff for years. Fairfax even organized a bid to take BlackBerry private in 2013, then abandoned it in favour of a bond deal and management shakeup that brought in John Chen as chief executive officer.

The sudden rise has been partly fuelled by Reddit forums and social media channels where speculators seek out unloved or heavily shorted stocks like GameStop Corp., hoping to drive them up quickly.