Nintendo shares plummet after investors realize it doesn't actually make Pokémon Go

Nintendo shares have skyrocketed since Pokémon Go's release and instant transformation into global cultural phenomenon, but they fell dramatically today after investors realized that Nintendo doesn't actually make the game. Nintendo put out a statement after the close of trading on Friday pointing out that the bottom-line impact will be "limited" as it only owns 32 percent of The Pokémon Company, and that revenue from the game and its Pokémon Go Plus smartwatch peripheral have been accounted for in the company's current forecasts.

Pokémon Go is a collaboration between The Pokémon Company and Niantic Labs, the developer who previously created the similar AR game Ingress as part of Google. This apparent revelation caused shares to plummet in Monday trading, with the stock dropping 17 percent at one point, representing about $6.4 billion in value; as Bloomberg notes, Tokyo stock exchange rules prevent share prices from moving more than 18 percent in a single day.


It appears that Nintendo's huge stock bump, which took the company past Sony in market capitalization, was fueled by investors with the misguided belief that Pokémon is wholly a Nintendo creation and that the company would benefit accordingly. Nothing that Nintendo said in its announcement on Friday was new information — there isn't a Nintendo logo to be found anywhere within Pokémon Go itself, and the status of the game's ownership has been clear since it was announced last year.

Nintendo does have its own mobile initiative in partnership with DeNA, and will soon release games based on the Animal Crossing and Fire Emblem franchises. Those are the titles with the potential to bring serious financial reward to the company if they perform well. Pokémon Go, on the other hand, simply serves as an example of how Nintendo IP could flourish when smartly deployed in the smartphone world.

The good news on the Pokémon Go front is that the game finally launched in Japan just ahead of the weekend, and I can tell you that it's already a phenomenon unlike anything I've ever seen here. There's no telling whether it'll have staying power, but you can't walk anywhere in Tokyo without finding someone attempting to catch a Psyduck. More than 10 million people had downloaded the game by Friday evening, just hours after it became available.


Comments

That was cute.

dumb investors

Yeah no, sorry. Dumb Assumption from Verge and its users to associate the drop in stock prices to this "news". Its actually scary how little most people know what affects stock prices.

This news article reads like the Onion

TURN AWAY NOW THE ENTIRETY OF COMMENTS BELOW ARE BY PEOPLE WHO HAVE NO IDEA HOW STOCKS and "INVESTORS" WORK

also nintendo may own a small portion of the pokemon company, but they also have a stake in Gamefreak who also in turn have a stake in the pokemon company

Yeah I’m pretty sure the reason is more this:

revenue from the game and its Pokémon Go Plus smartwatch peripheral have been accounted for in the company’s current forecasts

Than the lack of awareness of who owns the game.

If you understood who owns the game, you wouldn’t think that its success would be a boon for Nintendo significant enough that it wouldn’t have been factored into forecasts. Nintendo doesn’t seem to be surprised by the game’s performance, and neither should investors — the statement didn’t say anything new.

While Nintendo doesn’t own the game, they still have a financial stake. And Pokemon is still their IP. I think the fact that Nintendo isn’t surprised by the games performance is the new information. It’s the only fact that the public could not possibly be aware of.

Investors were operating under the assumption that the game was exceeding expectations (regardless of how much of an ownership Nintendo held).

And by all accounts, I think that it has. Niantic was clearly not prepared for the surge of users. I think this is more of an example of Nintendo hedging against a sharp drop-off of users as the game exits its infancy.

But basic knowledge of The Pokemon Company and how app stores work would have told investors not to get too excited about Nintendo even with the obvious slam dunk of a wildly viral Pokemon mobile game. Nintendo knew this, as did anyone who understands the company, including various analysts that said as much last week. Why didn’t investors?

I could see long-term bets being made on the basis of the game sending a message to Nintendo, but evidently that wasn’t what happened — it was just a hype cycle.

Do you have data showing how much money came from investment firms vs regular joe investors? If most of the money came from the public then your theory that clueless investors’ ignorance might have a chance of being accurate. And even then, news outlets were pretty clear that Nintendo didn’t make Pokemon Go themselves, so I doubt very much there were that many investors clueless to that fact.

Investment firms have people specialized in knowing the industries they invest in. I’m preeetty sure they knew Niantic made the game.

Ghost 650’s theory that investors were under the assumption that Pokemon Go was doing better than expected seems more plausible. Nintendo’s press released revealed they had (allegedly) already accounted for any profits the game might make for them. So Nintendo might be telling the truth, or they might be lying. If they are lying then it would seem Nintendo is "hedging against a sharp drop-off of users as the game exits its infancy," as Ghost650 said.

It wasn’t just hype.

Considering that Nintendo owns a third of the Pokemon company and that I also has a stake in one or two of the other (private) companies that owns the other thirds, it’s pretty much their IP, regardless of the logo that appears on the splash screen.

I didn’t bring up the fact that GameFreak and Creatures Inc. are private for nothing. Since Nintendo is the biggest stakeholder of the Pokemon brand and the only public company of the bunch, it’s also the only link through which investors can make money off Pokemon GO. Just for the huge amount of publicity that this game brought to Nintendo, it was probably worth the investment.

Nintendo only did the right thing lowering expectations (and taking a hit because of it) because it would have been much worse if the news dropped when they released their latest earnings.

In any case, even if it doesn’t "own" (read make) the game, Nintendo is pretty much the only entity who stands to benefit from Pokemon GO’s success.

In any case, even if it doesn’t "own" (read make) the game, Nintendo is pretty much the only entity who stands to benefit from Pokemon GO’s success.

How do you figure that?

What’s actually scary, is that most investors don’t know what affects stock prices, which probably includes you.

representing about $6.4 billion in hypothetical value that was never paid, received or exchanged by anyone.

Representing value in Mark-to-market (i.e. the number of share times last price) is misleading.
Also, money on the market never disappear: every loss is someone gain.

I don’t really care for stock markets or analysts – they seem to live in their own bubble and push prices up and down on a whim, or obviously for a profit.

But surely it is a zero sum game – when someone buys stock at a certain price, someone sells it to them at that price? So for all then Nintendo stock bought and sold in this farce, surely the combined profits minus the combined losses must be zero (give or take a few rounding calculations)?

It’s because there’s winners and losers in the stock market. It’s gambling. Money from the losers goes to the winners.

Technically, the money all floats up into the air and the middlemen pluck out the guaranteed money while everyone on every end of all the transactions come out with a little bit less. Then they have to find new suckers to throw money into the system and the process repeats. Some people come out with more today, some people come out with less tomorrow but the only winners are the ones who don’t gamble and just take the money off the top for the convenience of allowing you to gamble.

Even if you’re a huge winner in getting your stocks to come up right more often than wrong, you’re still a loser compared to the guy who did nothing, took your money off the top and laughed all the way.

It’s still all gambling. The people you speak of are "the house" and "the house always wins".

No, because this is the real world, not a vacuum, and millions upon millions of stock transactions would have occurred during this period of time, not to mention commissions, etc. To say that it’s a ‘zero sum’ game is an extreme oversimplification.

representing about $6.4 billion in hypothetical value that was never paid, received or exchanged by anyone.

Except for, you know, the people who bought and sold the stock. They would be the "investors" mentioned in the article. They do this thing called buying and selling stocks, and when the stock they just bought at a specific price crashes in value they lose money. Which brings us to your second, even more baffling delusion:

Also, money on the market never disappear: every loss is someone gain.

Which, I mean, what can you honestly say to this?

I presume that they were referring to the theoretical value that Nintendo had reached not equaling actualised wealth for the vast majority of investors.

Apple is worth $529bn, but if all the current share holders started selling out they would be very unlikely to get a total of $529bn as the price would likely drop significantly between the sale of the first share and the 5.477 billionth share. A buyout would achieve the 100% or more transfer but that’s due to simultaneous transactions.

Goes to show how little "expert investors" actually know about anything.

The expert investors knew exactly what was going on. They rode the wave of the stock price increase then sold in time to capitalize on that increase. You didn’t need to know who owned what. You just needed to have good timing.

Thank you for actually having a brain.

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