The phenomenal success of Pokemon Go led to a tremendous surge in the price of Nintendo’s stock. Billions were added to its market cap–the total value of all of it shares–helping it to reach more than double where it stood earlier this year. Now, with the game’s popularity potentially plateauing and investors realizing what effect it will actually have on Nintendo’s bottom line, the company’s share price is taking an inevitable dive.
At the close of market today in Japan, Nintendo’s stock had dropped 5,000 yen to 23,220, a decline of about 18 percent–the maximum allowed in a single day. Bloomberg notes this is the biggest drop for Nintendo since 1990, although the price of the stock is still way up from where it was (just over 14,000 yen) when Pokemon Go first launched in the US and other regions in early July.
It appears many investors either ignored or were simply unaware of Nintendo’s involvement with Pokemon Go. Pokemon is closely associated with Nintendo; past video games have almost exclusively been released for Nintendo platforms.
However, Pokemon is owned by The Pokemon Company, in which Nintendo has a 32 percent stake. Pokemon Go was developed by Niantic, and any revenue generated through the iOS or Android app stores sees 30 percent go to Apple or Google, respectively. Although we don’t know the specific arrangement that Nintendo has for the game, all of this collectively means it’s getting a smaller piece of the pie.
Pokemon Go Plus
While this was already known, Nintendo reiterated all of it in a statement released following the market’s close on Friday (hence the surge in investor activity today). It stated that the income from Pokemon Go reflected on its business results will be “limited.” It also stated that its previous projections for the current fiscal year (which runs through March 31, 2017) already take into account the impact of Pokemon Go and the Pokemon Go Plus accessory, which Nintendo is producing and distributing. As a result, it won’t be updating its forecast for the year to adjust for the performance of Go. It will report its first-quarter earnings (covering the period ending June 30, prior to Go’s release) on Wednesday, July 27.
Go only just recently launched in Japan and Hong Kong, with more regions still to come. Nintendo will no doubt benefit from it, but clearly not to the degree that investors initially expected. For more, check out our roundup of Go news.