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Nokia short sellers get nasty surprise
04 September 2013
Microsoft’s shock announcement causes rally in Nokia shares
Short sellers targeting Nokia received a nasty shock on Tuesday September 3 as the Finnish mobile phone maker’s shares rise by almost 50%.
The rally followed Microsoft’s announcement it would buy Nokia’s mobile devices arm for €5.33bn (£4.5bn).
The surprise news caused a short squeeze in the market following recent heavy demand to borrow Nokia’s stock.
According to data from Markit Securities Finance, 11.9% of the company’s shares are out on loan based on trades settled on August 30. Markit said Nokia is one of the most shorted European stocks.
The announcement from Microsoft sent Nokia’s share prices skyrocketing, yet Markit said this is likely to be partly due to short sellers trying to exit their positions which then pushed the share price even higher.
Markit said the short squeeze “highlights the risk of large short positions in stocks which become ‘takeover’ targets”.