Nintendo Stock Skyrockets, Then Plummets Because Investors Were Confused

Nintendo stock went for a wild ride this month after the launch of Pokemon GO, leaping and then falling not because of the game's actual profitability but because stockholders are skittish and prone to assumption. Photo via Bloomberg/Getty Images

On July 6, the day Pokemon GO started rolling out in the West, Nintendo shares were trading at ¥14,380 ($181). By July 19 that number had skyrocketed to ¥31,770 ($401), a tremendous leap that led to headlines everywhere about how the company had gotten its groove back. What pundits and impulsive investors didn't realise was that Nintendo was never seeing the bulk of revenue from Pokemon GO. For a few weeks Nintendo stayed silent about how big a cut they were getting, which led traders to assume it was Very Big and buy lots of Nintendo stock. This caused a massive spike in value.

Although Pikachu and crew will always be associated with House Mario, Pokemon actually belongs to a separate entity, The Pokemon Company. Nintendo owns about a third of The Pokemon Company. The rest belongs to two private Japanese companies, Game Freak and Creatures. Pokemon GO's developer, Niantic, is also a privately held company, although Nintendo reportedly holds a stake in it. Factor in the hefty cuts from Apple and Google on their respective app stores and you can see that Pokemon GO isn't making as much money for Nintendo as investors had assumed, despite its status as global phenomenon.

On Friday, Nintendo sent out a warning to stockholders explaining all this: "Because of this accounting scheme, the income reflected on the Company's consolidated business results is limited." Skittish investors started to sell immediately, and by the end of trading in Tokyo on Monday, shares had dropped to ¥23,320 ($295).

Nintendo's still way more valuable than it was at the beginning of July. But the stock market is a volatile thing, often influenced more by guesswork and assumption than it is by actual facts. Maybe more investors should have read the fine print?


Comments

    This isn't surprising news, but I imagine that we'll see something of a bump up again when Sun and Moon come out because of the Pokémon GO fever leading up to it. Although I guess that depends how long the craze lasts. The mobile market is often as fickle as the stock market.

    This was raised in their last shareholder meeting... shareholders are not all investors, there are shareholders that are just fans.

    Thats why their shareholder meeting is a wierd mix of business questions and computer game questions... which you dont see as often as say an Ubisoft or EA investor call.

      I remember reading a Kotaku article awhile back about a investor complaining that he would rather have a shuttle bus service to the investor meetings that the goodie bags they hand out, definitely i large divide in Investors and Fans at Nintendo, must be a strange thing too try and balance the meetings.

        I would love to be an investor just to be able to hound them year in and year out - "where is F-Zero? Why aren't you making Battalion Wars 3?"

    Two things:

    Reporting on the stockmarket being volatile/heavily reliant on guesswork and assumption is itself really just guesswork and assumption on the part of the reporting. Sites that put up smug headlines like 'look at this Nintendo financial news, weird eh' can't turn around and draw their own narratives - they just got done telling us not to do that. Mark's got the right of it.

    The other issue here a person's stocks or shares in their portfolio can't be very well-regarded by said person if they're just treating them like a flutter at the races. Your investments are in most cases looked after by a planner or advisor (or maybe not) - the major stuff you have interests in is definitely guided by Expert Opinion.

    I just can't fathom how so many people would listen to so much bad advice in the first place to a) blindly buy Nintendo shares, and b) rush to a fire sale so soon.

    Investors don't do that, gamblers do.

      The digital herd can be a scary thing. Much of that investment would be our superannuation. Mass managed funds managed by a recent university graduate who follows trends.

      Most investors are mum & dad shareholders and armchair buyers who don't research anything, just think "i like pokemon, if i have shared i can get paid money for liking pokemon" they don't understand how any of it works and don't care enough to understand.

      and to think these people power the economy basically.

    I'm not sure if skittish is the right word for those getting out. The price spiked and they're cashing out before it settles back down where it's meant to be. It's a pretty logical thing to do.

    I doubt it's a case of people not understanding who owns pokemon go. Looks at almost any company who's stock has a jump like nintendo's did and they eventually hit a point where they retrace back to a more reasonable level. People who got in on the up and people who have held the stock a long time will eventually hit a point where they want to sell off for profits. Chart nearly any stock that's risen sharpely with a big announcement and unless its followed up by multiple good announcements or something big like taking over another company it'll usually do the same thing nintendos has done.

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