Investor sues BlackBerry over inflated share price

Oct 07, 2013
<p>Smartphone manufacturer&rsquo;s CEO and CFO &lsquo;misled&rsquo; investors over company prospects</p>

Mobile phone firm BlackBerry is the subject of a class action lawsuit filed by one of its prominent shareholders, Marvin Pearlstein, over allegations its executives were overly optimistic about the company’s future.

Pearlstein’s action accuses BlackBerry’s chief executive, Thorsten Heins, and chief financial officer, Brian Bidulka, of deceiving investors about the money-making potential of the BlackBerry Z10 smartphone and the group’s wider prospects. Pearlstein says he is acting on behalf of investors who bought shares in BlackBerry between September 2012 and 2013, when the company revealed it was laying off 40 percent of its workforce in an effort to reduce costs.

The lawsuit claims the Ontario-based firm failed to tell investors ‘the company was not on the road to recovery and re-emerging as a lead player in the wireless communications industry’, despite BlackBerry’s assurances to the contrary.

In reality, the BlackBerry 10 ‘was not well received by the market’, the suit continues. ‘The timing and magnitude of BlackBerry’s stock price decline negates any inference that the loss suffered by the plaintiff and other class members was caused by changed market conditions, macroeconomic or industry factors.’

The court filings also suggest a number of press releases and quarterly conference calls were deliberately intended to ‘deceive the investing public’.

BlackBerry has faced similar class action lawsuits in the past. In 2011 a US judge rejected claims the company’s executives had misled investors over BlackBerry’s financial position and the prospect for its new devices, including the failed launch of its PlayBook tablet.

Though the mobile firm was once an industry leader in the smartphone market, BlackBerry has seen the appeal of its keypad-based products diminish in recent years with the advent of touchscreen devices, such as Apple’s iPhone. In August BlackBerry announced it was looking into a number of options to improve its deteriorating financial position, including putting itself up for sale.

A tentative agreement was reached with a consortium – led by one of the firm’s investors – to buy the group for $4.7 bn. Recently, however, other potential buyers have been identified, including Google, Cisco Systems and software group SAP. These are now in talks with BlackBerry about buying the group outright or in part.

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