There are several who could not have foreseen any circumstance which could grant Nokia a +40% boost in share price, but it just happened today. While Nokia is getting rid of its underperforming smartphone business, one has to wonder what is Microsoft Corporation (NASDAQ:MSFT) playing at, but then so many among us have been wondering about the same question for several years now. There is also this bit that nags you whenever a headline jumps in your face saying, “Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is selling its handset business”, huh, isn’t that all Nokia does? No, apparently they have loads of very valuable patents which they are also licensing to Microsoft for a decade, so they are ‘good’.
Micorsoft buys an underperforming business to add to its own underperforming business
You will see several short positions in Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) from hedge funds but very few long ones, investors were never psyched about a company that has been unable to ride the wave of smartphones, but Microsoft could not keep it’s hands off it. UBS’ Gareth Jenkins and others seemed decidedly unexcited about the deal Microsoft just struck, saying that this will further hamper the sale of Windows 8 phones. JPMorgan Chase & Co’s analysts also sounded insipid about the deal in their note that was released before a conference call today. Raymond James maintained their rating of Microsoft but questioned what strategy the Windows maker will spin to not only anchor its own sales but also Nokia’s troubled business.
Nokia having one of the best days in market
However when considered from Nokia’s perspective, the deal is a blessing. Getting paid for a business that has lagged margins, I mean who could not be excited about that. Credit Suisse upgraded Nokia to Neutral from Underperform, Bernstein Research took it up a notch to Market Perform, and Deutsche Bank upgraded to Hold. As a result Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is up in excess of 35% whereas Microsoft Corporation (NASDAQ:MSFT) is down 6%. So much for Steve Ballmer leaving the company.
Hedge funds suffer in Nokia shorts
Since Nokia was considered a lost cause, several hedge funds had short positions in the company, most notably Tiger cubs. These funds disclosed their negative bets in Nokia in November 2012 and have intermittently covered and increased their positions. As of now Nokia is up over 98% compared to November’s lows, so this is a really difficult time for the short positions.
The leading shortsellers of Nokia have been Rob Citrone’s Discovery Capital with 2.2% short in Nokia’s outstanding shares, Steve Mandel’s Lone Pine Capital 1.4% short, Andreas Halvorsen’s Viking Global with 1.61% , Lee Ainslie’s Maverick Capital 1% and John Griffin’s Blue Ridge Capital 1.4%. Whitney Tilson of Kase Capital also disclosed that he is short Nokia in 2012, and as of July, he was still shorting the stock and this one happened to be his only performing short position, but not anymore.
There are also some lucky long positions in Nokia that are having a field day, Boaz Weinstein’s Saba Capital owns 400k shares of the company, Balyasny Asset Management and Loeb Offshore Management also hold a position in the company. Dodge & Cox is the biggest shareholder in the company with 175 million shares.