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International Column
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The problem with RIM – Its top management!
Investors are getting unhappier by the day with the BlackBerry maker. Justified.
Issue Date - 08/12/2011
With its stock down about 65% this year, Research in Motion, the maker of the BlackBerry, has no shortage of unhappy shareholders. But few of its investors have sought and received as much attention over the past few months as Victor P. Alboini, Chairman and CEO of Jaguar Financial. In several interviews since June, Alboini has called for the replacement of RIM’s co-CEOs, demanded the appointment of an Independent Chairman and urged the company’s board to consider selling the company or breaking it into three units. While many analysts have been critical of RIM, no other investor has made as public a clamour against the company as Jaguar. But a closer look at Jaguar Financial raises questions about whether it really has clout over RIM’s strategies. Often characterised in media reports as an activist investor, Alboini is little known in US. He and his company are not major forces in Toronto’s financial community, as he acknowledges. Even after its steep decline this year, RIM has an m-cap thousands of times larger than Northern Financial, the holding company through which Alboini controls Jaguar.

Doubts about Jaguar’s influence are not helped by Alboini’s decision not to disclose the size of his stake in RIM or identify the 13 other investors who he says back his crusade and collectively hold 10% of RIM.

But a perhaps larger issue is the track record of his own companies. This year, Northern Financial’s share price dipped so low that it was forced to sell about $3 million in stock to avoid being delisted from the Toronto Stock Exchange.

Then, in October 2011, the Canadian regulator of securities dealers said it would hold a hearing into accusations that Alboini and other executives of Northern Securities, the brokerage firm owned by Northern Financial, had violated several rules when executing trades on behalf of Jaguar. And while separating the positions of CEO and Chairman is at the top of his to-do list for RIM, Alboini performs the dual role at Northern Financial, Jaguar and a small Canadian pipe maker, Lakeside Steel. Alboini, a former securities lawyer and author of a widely-used Canadian textbook on security laws, said his dual roles were a matter of circumstances. Saying that his three companies are small, “my only pitch would be that the higher you move up the food chain, more independence between the Chairman and CEO is required. I justify the difference on that basis.”

Alboini has not raised these concerns directly with RIM’s management, and in October, John E. Richardson, RIM’s lead director, withdrew an agreement to meet him. “Mr. Richardson does not believe that Jaguar’s interests are aligned with RIM’s long-term shareholders,” said Tenille Kennedy, a spokeswoman for RIM. Like many disgruntled RIM investors, Alboini questions the credibility of Jim Balsillie and Mike Lazaridis, the co-CEOs of RIM, after the company repeatedly missed financial forecasts and delayed product introductions. But he goes beyond that to blame their outside interests for much of what has gone wrong at RIM.

Until recently, Alboini maintained, the two leaders spent about 75% of their work time dealing with personal projects. In Balsillie’s case, it was an unsuccessful attempt to acquire a National Hockey League team; for Lazaridis, it was financing and establishing the Perimeter Institute for Theoretical Physics in Waterloo, Ontario, the city where RIM is based.

Kennedy said that Alboini’s claims about how the co-CEOs spend their days “are inaccurate, completely outside Alboini’s knowledge and frankly ridiculous.” While Jaguar now describes itself as a merchant bank, it originally was a Montreal-based mining company known as Jaguar Nickel. In 2006, Jaguar sold its last mining properties to BHP Billiton for about 30 million Canadian dollars. The resulting hoard of cash prompted a hostile bid by Northern. Before this year, Jaguar had no experience in the technology or telecommunications sectors. And its activist role has mainly involved much smaller companies. It began a takeover bid for a courier company that specialised in medical industry shipments in 2007. While unsuccessful, Jaguar nevertheless walked away with a gain of 10.2 million Canadian dollars on its shares. It also persuaded the Ontario Securities Commission in 2009 to block a takeover by HudBay Minerals of another Canadian mining company that Alboini had argued excessively benefited the target company.

When it comes to explaining the performance of Northern Financial, whose stock has a 52-week high price of 32 Canadian cents and is trading at just more than five Canadian cents, Alboini sounds somewhat like Balsillie and Lazaridis. All of them describe their situations as times of transition that should soon reverse. As for the regulatory hearing, scheduled for May 2012, Alboini dismissed the accusations as “totally preposterous” and characterised them as the product of nitpicking by an overzealous regulator. Alboini created his consortium of RIM investors through contacts and, in some cases, by cold-calling investors. While declining to quantify his stake in RIM, he acknowledged that it is relatively small. Under Canadian securities law, stockholders with less than a 10% stake do not need to publicly identify themselves. Jaguar’s role, he said, is to be a public voice for large, institutional investors that prefer not to present their disagreements with companies in public. “In Canada, you might ask yourself who are the people who would step forward and try to provoke change. There are not many, if any at all.” None of the investors he says he represents has any formal commitment to Jaguar, so he is not naming them publicly or identifying them to one another.


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