Investor exuberance pushes BlackBerry share price to 9 year high — for no rational reason

Shares in Canadian technology company BlackBerry are changing hands at their highest level in almost a decade on Monday, as investor enthusiasm for the once high-flying stock has mysteriously returned.

BlackBerry shares were trading at almost $25 a share when the Toronto Stock Exchange opened on Monday, up more than $7 or more than 40 per cent from Friday's level.  

The stock was briefly halted on Monday morning when its rise set off automatic circuit breakers that trigger when companies see their value climb or fall rapidly. When trading resumed, the shares pulled back a little, but they were still up 20 per cent to close at $22.92.

The stock has been quietly rallying for several days now, before taking off on Monday. When 2021 began, the company was worth just over $8 a share. It's now worth about three times that.

The company has had a number of small pieces of good news in recent weeks, but nothing that would explain Monday's rise in share price.

Regulators halt trading 

The company itself admitted as much in a news release Monday, saying it is "not aware of any material undisclosed corporate developments ... that would account for the recent increase in the market price or trading volume of its common shares."

BlackBerry made that statement at the request of regulators, who put a halt to all buying and selling of BlackBerry shares until the TSX could sort out what exactly was going on.

Last month, the company signed a deal with Amazon to work on a connected cloud software program for cars, and then in mid-January BlackBerry favourably settled a patent fight with Facebook, but Morningstar analyst William Kerwin says neither development is good enough or recent enough to explain Monday's surge.

"BlackBerry's stock movement doesn't appear to be rooted in any fundamental firm changes, in our view," he said in an email to CBC News.

Instead, the company has seemingly become one of many recent firms to benefit from a groundswell of retail investor enthusiasm on popular online message boards such as Reddit, regardless of whatever the Wall Street community thinks. Of the 11 analysts who cover the company, nine have a "hold" rating on the company's shares, and two have "sell" recommendations.

None suggest buying. But that's not stopping retail investors from doing exactly that.

"BB is moving on Reddit boards," said Ophir Gottlieb, CEO of trading firm Capital Market Labs. "Not much else to say, but this is not a single stock story; it is a behavioural story."

Latest in a series of unexpected rises

U.S. video game retailer GameSpot has seen its shares quintuple in recent weeks as retail investors pile into the company, even as institutional money is shorting the shares.

Short sellers make money by betting against stocks. While BlackBerry has very few of its shares being currently shorted, it is being swept up in the same tide of retail investor exuberance.

More than 26 million of BlackBerry's shares changed hands in Toronto Monday. That's more than five times the usual volume.

Colin Cieszynski, chief market strategist with SIA Wealth Management in Toronto, says BlackBerry is just the latest in a series of companies that have seen unexpected rises in share prices in recent weeks.

The current stock market rally has driven up the valuation of huge companies, and now investors are moving down the food chain looking for bargains.

"Smaller stocks don't have as much liquidity or stock available to trade so a sudden stampede of cash chasing into a smaller cap stock can swamp supply and cause the kind of massive spikes on no news that have started to really pop up in the last week or so," he said in an email to CBC News. 

"So to me, these moves are more about market sentiment, relative performance, and supply/demand issues rather than fundamental news."

Kerwin agrees that there are no fundamental changes to BlackBerry's business that properly explain the price surge.

"We think there's likely a shift in market sentiment about BlackBerry, perhaps with investors getting more bullish about [their] prospects after the fact. There's above average trading volume this morning, which might also point to [a] retail investor swell."

'Most undervalued stock in the world'

British Columbian Paul Ni is one such retail investor who's riding that swell. Ni said he first became interested in the company last November, when his due diligence led him to deduce the company was the "most undervalued stock in the world."

He's active on a Reddit board called wallstreetbets, that boasts nearly two million people, sharing their thoughts on various equities. "How to evaluate a stock is supposed to be done by Wall Street," he told CBC News in an interview. "But now we already dig it out."

He bought at around $6 a share. Despite the shares now being almost five times higher than that, Ni has no plans to sell any time soon because he thinks more people are realizing the value of the company's automotive technology, which includes software used in self-driving cars and other automotive functions.

The company is currently worth $12 billion since its run-up, but Ni says it should be worth $50 billion or more.

"We are very proactive about discovering value," he said of his fellow investing Redditors.

Greg Taylor, chief investment officer at Toronto-based money manager Purpose Investments, says while he thinks BlackBerry is a good company with a decent balance sheet that has managed to legitimately turn itself around, the stock market valuation has gotten way ahead of itself.

"What we've got is a lot of stimulus in the system, and people have more cash that they're starting to deploy to the stock markets, and it's really gotten to more of the gambling phase more than anything else," he said in an interview.