Smartphone maker BlackBerry is abandoning a plan to sell itself and instead will replace its chief executive officer and raise about $1 billion (€0.7bn) from institutional investors.

Shares of BlackBerry dropped 16.3 per cent to $6.50 in pre-market trading. The company said it would raise the money with a private placement of convertible debentures. John Chen will be appointed executive chairman and will be interim CEO while the company looks for a new leader. He is the former CEO of Sybase, a database software company that SAP AG acquired in 2010. Chen joined private equity group Silver Lake as senior adviser last year.

BlackBerry grew from a small technology startup into a multibillion-dollar company by pioneering on-the-go email, but it has lost much of its market share to Apple’s iPhone and devices that run Google’s Android software.

BlackBerry's largest shareholder, Fairfax Financial Holdings, will buy $250 million of the debentures.

BlackBerry said the subordinated debentures would be convertible into common shares at $10 and have a seven-year term. Fairfax announced a tentative $9-a-share offer for Waterloo, Ontario-based BlackBerry in late September, but it is struggling to finance the $4.7 billion bid.