This week we have learned that there are a number of different methods that can be used to value a company (or any potential investment for that matter). The big question is which method is most appropriate. In 2009, BlackBerry (formerly known as Research in Motion) accounted for 20% of the cellphone market. In June 2014, it accounted for only 1%. The company’s growth prospects appear dismal. So how do we value BlackBerry?
The argument for an asset-based valuation to value BlackBerry:
- Asset-based valuation is a useful measure to look at distressed companies with the potential to be turned around, and can be used to compare intrinsic value against the stock price.
- If there was an immediate sale of BlackBerry assets, what would it be worth?
The article below provides an overview of the valuation. BlackBerry shares are trading significantly below book value. However before rushing to buy BlackBerry shares, one should consider whether the book value can be realised through a forced sale of assets in the event of liquidation. The article uses asset values from the financial statements. I argue that a fair value approach to the asset-based valuation should be used.