NEW YORK (AP) — BlackBerry Ltd. shares plunged in premarket trading Monday on news that the struggling smartphone maker is abandoning its plan to sell itself to a private equity firm and ousted its CEO.
In premarket trading, BlackBerry shares dropped $1.44, or 19 percent, to $6.33 before being halted. Before the news broke, the shares had risen about 3 percent ahead of the company's Monday deadline to reach a formal sale agreement.
BlackBerry said that instead of buying the company, Financial Holdings Ltd. and other institutional investors will invest $1 billion in the company. The deal is expected to close in the next two weeks.
As part of the deal, Thorsten Heins will step down as the company's CEO and resign from the company's board when the deal closes.
Last month, BlackBerry reached a tentative agreement to sell itself to Fairfax for $4.7 billion. The company said at that time that it signed a letter of intent that "contemplates" selling the company for $9 per share in cash.
BlackBerry said the general terms of the deal were approved by its board and a special committee set up to review other options. It said it would negotiate and execute a definitive transaction agreement with Fairfax by Nov. 4.
But there has been interest from other parties. The Waterloo, Ontario-based company's founders, Mike Lazaridis and Douglas Fregin, said earlier this month in a regulatory filing that they might consider taking over the company.
BlackBerry has been entitled to shop around for other buyers over the past several weeks, but if it were to back out of the deal, it would owe Fairfax about $157 million.
The BlackBerry, pioneered in 1999, was once the dominant smartphone for on-the-go business people and other consumers. But then came a new generation of competing smartphones, starting with Apple's iPhone in 2007. The BlackBerry failed to innovate. The company's sales and market share shrank and it lost billions in market value.
Although BlackBerry was once Canada's most valuable company with a market value of $83 billion in June 2008, the stock has plummeted to $8 from over $140 a share, giving it a market value of $4 billion, more than $500,000 short of Fairfax's offer.