Canadian BlackBerry Ltd. shareholders have launched a class-action lawsuit against the troubled smartphone maker in Quebec, alleging that it “knowingly or negligently misrepresented” consumer demand for its latest line of smartphones and the company’s financial position.
The lawsuit, filed Tuesday, comes the same day that Waterloo, Ont.-based BlackBerry published an open letter in 30 daily newspapers in nine countries to assure its “customers, partners and fans” that the business is healthy, and has a long future ahead despite weeks of negative publicity.
The lawsuit was filed in Quebec Superior Court on behalf of Canadian shareholders who purchased BlackBerry shares between Sept. 27, 2012 and Sept. 20, 2013.
“For almost a full year, BlackBerry management made market statements based on prophecy rather than fact. Thousands of Canadians who invested in BlackBerry Ltd. in the past year have lost hundreds of millions of dollars,” said Tony Merchant, of Merchant Law Group, which launched the class action litigation seeking compensation for current and former BlackBerry Limited shareholders.
The lawsuit is similar to litigation launched in Ontario late last week. It alleges the company and its senior management “knowingly or negligently misrepresented that the BlackBerry 10 line of smartphones were being received well by international consumers and the public at large, and that BlackBerry Limited was in a strong financial position,” according to a statement by Merchant Law Group.
Last month, the company announced a pretax writedown of US$934-million for unsold phones (mainly the newest line of BlackBerry 10 smartphones) in the most recent quarter and plans to cut 4,500 jobs (or nearly one-third of its workforce).
In its open letter, the company said “you can continue to count on BlackBerry.”
It cited that the company had “substantial” cash on hand and a debt-free balance sheet. The restructuring underway will cut BlackBerry’s expenses by 50%, the letter read.
“These are no doubt challenging times for us and we don’t underestimate the situation or ignore the challenges,” it said. “We are making the difficult changes necessary to strengthen BlackBerry.”
BlackBerry has a tentative US$4.7-billion takeover offer from a consortium of investors led by Fairfax Financial Holdings Ltd., but other offers may emerge, including one from Research In Motion co-founders Mike Lazaridis and Doug Fregin.
BY ARMINA LIGAYA, FINANCIAL POST OCTOBER 16, 2013