BlackBerry saw a win in a lawsuit brought by shareholders. Is this legal battle over?
When BlackBerry introduced BB10 to the world, they brought a mobile OS that was different and better than any other mobile OS in the market. Knowing this, they brought out two phones, the BlackBerry Z10 and Q10 with the expectations that these phones would do something they did not. Sell.
Much to the chagrin of BlackBerry lovers the world over, the initial BlackBerry Z10 and Q10 were sales failures. BlackBerry had the supply, but didn’t have the demand, and in September of 2013 was forced to take a markdown of nearly $1 Billion on unsold stock. This resulted in BlackBerry shares to suffer a huge loss which left their value at about one sixth their previous value. This also set the ball rolling for a lawsuit.
A lawsuit was brought by shareholders against BlackBerry claiming that BlackBerry fraudulently inflated their stock price. The arguement was that BlackBerry had attempted to conceal the poor performance of these devices from their shareholders in order to maintain stock prices. After winning the initial case, the case was appealed in the Second U.S. Circuit Court of Appeals in New York. The three judge appeal panels struck down the appeal, stating that the complaint amounted to “fraud by hindsight”. BlackBerry would have needed to know that the devices would be unsuccessful from the outset in order for the complaint to hold true.
Unfortunately, the appeals court have left another avenue should the shareholders wish to continue their lawsuit. The lawsuit as it stands is over, however, the appeals court counceled the plaintiffs that they could try to persuade the lower court to allow them to amend their complaint. In the time since the markdown, BlackBerry has changed it’s executive team. John Chen has taken the helm and has completely changed the direction of the company. BlackBerry has gone from a beleagured phone manufacturer to a growing software company. This growing software company is unmatched in their offerings, and finally, it is starting to show.
The stock market is a game. Sometimes you win. Many times you lose. There are no guarantees, especially in technology stocks. Did BlackBerry know that they would be losing by introducing the Z10 and the Q10? I don’t believe so. And I believe their actions since that time show that they have no intention to lose like that again. It might be time for these shareholders to step back from the lawsuits and allow BlackBerry to bring those stock prices back to what they were.