By Danilo Masoni and Gianluca Lo Nostro
MILAN (Reuters) -Shares in Franco-British satellite operator Eutelsat rose on Thursday, bringing gains over four days to near 650% in a rally that bears the hallmarks of retail traders amplifying moves on a highly shorted stock.
Suggestions the company could replace Elon Musk’s Starlink in providing internet access to war-torn Ukraine have fuelled a turnaround in sentiment this week for a stock that had been languishing at record lows.
After a six-fold increase in the previous three sessions, its shares rose another 18% on Thursday, valuing it over 4 billion euros ($4.3 billion) before retreating slightly.
By 1606 GMT, they were down 11% in a fourth day of heavy trading volumes.
“This is a classic short squeeze of relatively unheard-of proportions, but to be fair, proportionate to the tectonic shifts we see in global geopolitics since the election of Trump,” Bernstein analyst Aleksander Peterc said.
The rally started after Friday’s public row between Ukrainian President Volodymyr Zelenskiy and U.S.
President Donald Trump, after which Washington paused military aid to Ukraine.
Kepler Cheuvreux said leveraged bets by individual investors might have amplified the swings, triggering huge short covering and creating a “French version of the Gamestop effect”.
Video game retailer Gamestop was at the centre of 2021’s so-called “meme stock” rally on Wall Street, when stock influencer Keith Gill’s bullish bets sparked a trading frenzy among mom-and-pop investors.
The French broker noted intense discussion on Boursorama’s Retail forum in France.
The frenzy also seemed to catch individual investors elsewhere in Europe.
On Germany’s Tradegate, a popular venue for retail traders, Eutelsat has been one of the most executed orders this week.
On Thursday, it ranked first ahead of defence stocks Rheinmetall and Hensoldt.
“Eutelsat is a stock that retail traders like,” said Stephane Ekolo, equity strategist at TFS Derivatives in London.
“Hedge funds were short that stock and we are witnessing a short squeeze carnage.”
Eutelsat declined to comment on its share price performance.
In January, Moody’s cut Eutelsat’s rating further into junk territory, citing underperformance of its OneWeb satellites and pressure on cash flow given significant investment needs.
“The share price reflects a hope that Europe is going to deliver more support to Eutelsat, none of the fundamental economics that had led its share price to become so depressed have dissipated,” said Hamish Low at Enders Analysis.
The company is in talks with the European Union to supply additional internet access to Ukraine.
Adding another potentially bullish note is Eutelsat ranking among the companies also currently in talks with the Italian government about providing a system for secure satellite communications, two sources close to the matter have told Reuters.
The company’s bondholders also appeared to reflect a positive shift in sentiment, as a rally in the price of its 2029 9.75% bond brought the yield to 10.1%, down from a late February peak of 16.7%.
On Thursday, however, Fitch cut its long-term rating with a negative outlook, also saying it expected Eutelsat will need additional funding estimated at $4.2 billion until 2032.
($1 = 0.9267 euros)
(Reporting by Danilo Masoni in Milan and Gianluca Lo Nostro; Editing by Amanda Cooper)
