While BlackBerry has agreed to a buyout from Fairfax Financial for $4.7 billion, if the company burns through its cash it could give Fairfax a reason to back away from the deal. Private equity firms look to borrow funds against their prey's cash and other liquid assets, but if the amount of cash is dropping it would make it harder to complete the purchase of the company. On Wednesday, there was some news that another potential buyer, Cerberus Capital, was sniffing around the company and wanted to see the financials. The distressed securities firm told BlackBerry that it would sign a non-disclosure agreement so that it could check out the handset producer's financials.
Ferragu expects BlackBerry to lose 7 million members during the next quarter, and will need to spend more than expected for patent licenses. "We now believe there is virtually no collateral for a bank loan, and no credible story for a break up to justify more than a couple of billions for the equity," said Ferragu. If the analyst is right, Fairfax Financial, already the largest BlackBerry stockholder with a 10% stake, could be overpaying for the company at $4.7 billion and if so, BlackBerry could be in danger of never seeing a deal done at that price.