Fairfax boosts stake in RIM

As a result, the group of companies that Watsa heads boosted its stake in RIM to 26.85 million shares, or about 5.12% of RIM’s outstanding shares.

The move comes after shakeup at the embattled BlackBerry maker last weekend, which added Watsa to its board at the same time Jim Balsillie and Mike Lazaridis stepped aside as RIM’s co-CEOs. They remain on RIM’s board of directors but the role of chief executive has been filled by Thorsten Heins, a senior RIM executive.

Watsa’s move creates a powerful bloc of Canadian shareholders who together hold more than 15% of RIM’s stock — Balsillie, Lazaridis and now Watsa through Fairfax — possibly enough to counteract pressure from disgruntled shareholders who have been building up their holdings in the company.

According to the most recently available public information compiled by Thomson Reuters, California-based investment firm Primecap Management was RIM’s largest single shareholder with about 29 million shares as of Sept. 30.

Balsillie was the second-largest number of shares with about 26.7 million and Lazaridis, who co-founded the company, was the third-largest with 26.5 million shares as of last May.

Fairfax, which had about 11.2 million shares as of Sept. 30, purchased nearly 6.5 million shares on Wednesday and another 7.55 million shares on Thursday, according to a filing with U.S. regulators..

Based on Thursday’s closing price at the Toronto Stock Exchange, the shares controlled by Watsa and Fairfax would be worth about $437 million. RIM shares gained 52 cents to $16.80 at mid-morning Friday but remained about $1 below where they were a week ago prior to RIM’s weekend announcement.

Fairfax chief legal officer Paul Rivett said RIM is a “great company” at current market prices but Fairfax has no intention of buying more shares at this time.

“For now we’re going to continue to evaluate,” Rivett said Friday in an interview.

Shares of RIM were in a freefall last year as it lost about 70% of its market value, affected by a US$485-million charge before tax on the cost of discounting the price of PlayBooks and $50 million in lost revenues from an October service outage.

The company was already grappling with a more competitive marketplace for its smartphone devices with the emergence of Apple’s iPhone and other phones that use the Google Android operating system.

RIM stock hit a high of $140 per share in 2008. By early 2011, it had dropped to slightly under $70 a share, giving it a market capitalization just shy of $37 billion.

The stock has continued to lose its value on the market, falling to as low as $14.77 earlier this week after Thorsten Heins gave his first conference call with analysts since being named RIM’s chief executive officer on Sunday, taking over that role from Balsillie and Lazaridis. They remain directors of the company.

Fairfax, which is primarily invested in insurance companies but also businesses in other sectors, has been increasing its stake in RIM for some time. This week’s purchases come after the investment firm boosted its stake in the company by 40% last September to 11.8 million shares.

Activist shareholder Vic Alboini has been pushing for changes at RIM for several months, and has said the changes in RIM’s executive suite didn’t go far enough because they left Lazaridis and Balsillie with too much influence.

Alboini, president of Jaguar Financial Corp. in Toronto, also repeated his call for a strategic review that would consider every option, including a sale of the company or part of it.