On December 10, 2013, BlackBerry (NASDAQ:BBRY) stock declined to establish a ten-year price low at $5.44 per share. As recently as 2008, BlackBerry controlled roughly half of the smartphone market and Research in Motion share prices then approached $150.00. Ironically, it was BlackBerry founder Mike Lazaridis who declared “amateur hour was over” upon the release of a Playbook tablet he dreamed up to compete against the Apple (NASDAQ:AAPL) iPad. BlackBerry was to follow up the Playbook debacle with what Business Insider thoroughly ripped as a “disaster” in BlackBerry 10.
Still, BlackBerry stock has nearly doubled over the past quarter to close out the March 14 trading session at $9.31. Prospective investors should be advised that BlackBerry share prices might be subject to extreme volatility going forward. For now, BlackBerry managers are literally floating the note and buying time until engineers can design product to compete against the likes of Apple iOS and Google (NASDAQ:GOOG) Android. Going forward, BlackBerry shareholders may be forced to wave the white flag of surrender at Waterloo if this company remains shut out of American turf.
On December 20, 2013, BlackBerry released Q3 2014 financial statistics. For BlackBerry, its latest third quarterly period ended November 30, 2013. Blackberry identified a new organizational structure above $3.2 billion in cash on the books as highlights. Still, BlackBerry took $4.4 billion in net losses upon a mere $1.2 billion in revenue. BlackBerry has already racked up $5.5 billion in losses through the first nine months of this fiscal year 2014 year. Wall Street investors, however, have applied a $4.9 billion market capitalization price tag to BlackBerry. In effect, BlackBerry shares are trading off hope. In theory, all assets that cannot be leveraged for profit will depreciate towards zero.
Traders have targeted BlackBerry stock as an aggressive short position for two years running. A Trader would open a short position after borrowing BlackBerry stock from other investors and immediately selling those shares for cash. At a later date, this trader would re-enter the market and “buy to cover” BlackBerry to replace the original stock loan. Short sellers therefore profit amid steep share price declines. A short position, of course,exposes traders to extreme financial risks because share prices theoretically range between zero and infinity.
A “short squeeze” occurs when traders frantically buy to cover to close out short positions and avoid severe losses. BlackBerry is especially prone to the short squeeze phenomenon, due to its relatively small float. Yahoo Finance recently reported that traders had sold short 94.5 million out of 518.4 million shares of BlackBerry stock outstanding, as of February 14, 2014.