Why Nokia Stock Dived by Almost 6% on Monday

Investors often get excited when their companies announce and/or launch share-buyback programs. That’s because if they’re well-considered and effectively managed, they can add value to the affected stock.

Alas, it doesn’t seem like that’s the case with Nokia‘s (NYSE: NOK) latest share-repurchase initiative. On news that it has been formally launched, investors traded out of Nokia’s U.S.-listed shares, and they closed Monday nearly 6% lower in price. By contrast, the S&P 500 index landed in positive territory, rising by 0.6%.

New share-repurchase program kicks off

Before the U.S. markets opened, Nokia said that it had begun the first phase of its newest round of share buybacks. These were announced concurrently with the company’s fourth-quarter and full-year results at the end of January.

Back then, the telecom’s board of directors authorized repurchases of up-to 600 million euros ($653 million) worth of its shares across a period of two years. It should be noted that the company is only buying back the shares listed in its native country of Finland; the U.S.-listed stock will not be part of the initiative.

In the first of two phases of the program, Nokia will purchase up to 300 million shares ($327 million) of that Finnish stock. The earliest date for this to start is this coming Wednesday, March 20, and the phase will end by Dec. 18.

The glory days were quite some time ago

Nokia said that its main goal with the buybacks is to “optimize” its capital structure. It’s likely that many investors would rather the company devote its energies to growing its business, as it has fallen to the status of niche player in its sector rather than the dominant hardware maker it used to be.

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