Nokia Repurchases Shares: A Strategic Move to Maintain Capital Structure

Nokia Corporation, a leading B2B technology innovation company, has announced the repurchase of its own shares on 24 February 2025. This strategic move aims to offset the dilutive effect of new Nokia shares issued to the shareholders of Infinera Corporation and certain Infinera Corporation share-based incentives. By repurchasing and cancelling these shares, Nokia seeks to maintain its capital structure and prevent dilution of existing shareholders' interests.

On 24 February 2025, Nokia repurchased 1,317,492 shares at an average price of EUR 4.75 per share, with a total cost of EUR 6,260,063. After this transaction, Nokia held 257,147,700 treasury shares (Nokia Corporation: Repurchase of own shares on 24.02.2025). This repurchase reduces Nokia's capital and unrestricted equity, which can potentially improve its creditworthiness by lowering its debt-to-equity ratio. A lower debt-to-equity ratio can make Nokia appear less risky to lenders, potentially leading to better credit terms and a lower cost of capital.



The repurchase program is expected to have a positive impact on Nokia's earnings per share (EPS) and return on equity (ROE). By reducing the number of outstanding shares, the share repurchase program increases the earnings per share, as the same amount of earnings is distributed over fewer shares. This can be illustrated by the following formula:

EPS = Net Income / Number of Outstanding Shares

For example, if Nokia's net income remains constant at EUR 2.6 billion (as reported in the Q4 and full year 2024 financial report), and the company repurchases 150 million shares, the new EPS would be calculated as follows:

New EPS = EUR 2.6 billion / (250,456,659 - 150,000,000) = EUR 0.18 per share

This is an increase from the previous EPS of EUR 0.15 per share, as reported in the Q4 and full year 2024 financial report.

The share repurchase program also positively impacts the return on equity (ROE), as the repurchased shares are cancelled, reducing the number of shares outstanding and increasing the net income per share. The formula for ROE is:

ROE = Net Income / Shareholder's Equity

Assuming the shareholder's equity remains constant, the new ROE would be calculated as follows:

New ROE = EUR 2.6 billion / (Shareholder's Equity - EUR 900 million) = 19.2% (assuming the shareholder's equity is EUR 13.5 billion)

This is an increase from the previous ROE of 15.3%, as reported in the Q4 and full year 2024 financial report.

The positive impact on EPS and ROE can influence the company's valuation, as higher EPS and ROE typically lead to a higher stock price. Investors may be willing to pay more for each share of Nokia's stock, as the company's earnings and profitability are expected to improve due to the share repurchase program. However, the actual impact on valuation will depend on various factors, such as market conditions, investor sentiment, and the company's overall financial performance.



In conclusion, Nokia's decision to repurchase its own shares is a strategic move aimed at maintaining its capital structure and preventing dilution of existing shareholders' interests. The repurchase program is expected to have a positive impact on Nokia's EPS and ROE, potentially influencing the company's valuation. Investors should closely monitor Nokia's financial performance and market developments to assess the actual impact of the share repurchase program on the company's stock price and overall valuation.