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Why Nokia Is Issuing New Shares

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Encouraging employee commitment

Nokia (NOK) is issuing about 2.9 million new shares, although this issue is not for fundraising. To encourage employee share ownership, commitment, and engagement, Nokia launched an employee share purchase plan in 2016 (or ESPP 2016). 

ESPP is a company-run program that allows participating employees to purchase shares of the company at a discounted price.

Employees contribute funds to purchase shares under ESPP through payroll deductions, which are accumulated over time. The company running the ESPP program would use the funds to purchase shares on behalf of the employees participating in the program. The saving period of Nokia’s ESPP 2016 program ended on June 30, 2017.

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Fulfilling ESPP obligations

Under its ESPP 2016 program, Nokia committed to offer one matching share for every two shares purchased by employees under the plan. The company is issuing 2.9 million new shares to fulfill its obligations under the ESPP 2016 program.

Fostering employee commitment

Nokia has struggled to grow sales in recent quarters amid a slowdown in network equipment buying and stiff competition from its rivals. As a result, a more engaged and committed workforce could boost the company’s prospects.

In 2Q17, Nokia’s adjusted net revenues fell 1.0% year-over-year. Its Europe-based (EFA) rival Ericsson (ERIC) also reported a revenue decline of 8.0% year-over-year in 2Q17. Ericsson’s revenues in 3Q17 fell 6.0% year-over-year. 

Nokia’s US-based (SPY) competitor Cisco Systems (CSCO) also registered a 4.0% drop in revenues in 2Q17.

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