GameStop May Be a Game, But Nokia Sure Isn’t

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The Reddit trading target we really need to talk about isn’t GameStop Corp. or AMC Entertainment Holdings Inc. It’s Nokia Oyj.

While shares of GameStop and AMC have surged as bands of Redditors have piled in, Nokia stock is the biggest gainer in Europe this week for the same reason. At one stage yesterday, shares in the Finnish company that are listed in the U.S. jumped 63% before falling again. That’s a far more worrisome phenomenon.

To be clear: For the people involved in GameStop or AMC, the recent share surges may be life changing. It’s creating gobs of wealth for some, destroying the short positions of others and leaving employees of those companies goodness only knows where. But neither GameStop’s video game stores nor AMC’s cinemas are, in any real sense, systemically important.

The telecoms networks that Nokia builds, however, are. If the r/WallStreetBets phenomenon has, to some extent, been fun and games, the targeting of Nokia stock is a real cause for concern.

The global telecoms equipment market is dominated by three players: Nokia, Sweden’s Ericsson AB and China’s Huawei Technologies Co. Between them, they build most of the critical network infrastructure that underpins not just your broadband and cellphone connections, but the networks for factories, hospitals, law enforcement and anyone else who, well, communicates. And because security concerns about China are cutting Huawei out of markets like the U.S., U.K. and France, those countries are increasingly dependent on just Nokia and Ericsson.

Messing with the Finnish company’s share price is therefore not just creating a financial risk. It has more profound implications.

As long as the stock is going up, the company benefits, of course. But Nokia itself issued a statement on Wednesday saying it was “not aware of any material, undisclosed corporate developments or material change” that would account for the surge. The fear is about what happens if Reddit traders tire of the investment when the cold reality of the company’s earnings fundamentals starts to hit home. A major sell-off could damage a firm like Nokia’s access to capital. It may also be particularly fragile since it’s in the middle of a restructuring program intended to right some of the missteps it’s made in recent years.

For now, the impact on Nokia’s share price is nowhere near the excesses of GameStop or AMC. Where the two American companies’ shares have each climbed more than 400% in the past week alone, Nokia has jumped just 30% since Jan. 22. That’s being driven by retail trading of the company’s American depositary receipts, rather than trading of its home listing in Finland. To be fair, this is the sort of price increase that, in normal circumstances, could result from reports of prospective dealmaking. It’s a big move, but not completely outside the realms of normal volatility.

But if the Reddit frenzy continues, and other European companies start getting swept along by the tide, executives may start thinking twice about whether they want to retain their American listings. European trading has been a lot more stable. It’s unlikely that companies want to expose themselves to the sort of volatility enabled by trading apps like Robinhood Markets Inc., which doesn’t have direct access to European exchanges yet. 

Let's hope the GameStop trend corrects itself before companies decide that the risks of having a U.S. listing outweigh the rewards.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

©2021 Bloomberg L.P.

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