Less than two weeks ago, Nintendo’s shares jumped nearly 10 percent to a six-year high, following the launch of Pokémon Go. A week later, it became the most traded company by value of shares traded this century on the Tokyo stock market.
But it looks like investors may have celebrated too soon. Ahead of the augmented reality game’s Japan launch last weekend, Nintendo issued a warning to shareholders, stating it won’t immediately earn them as much as they’d have dreamed:
The Company owns 32 percent of the voting power of The Pokémon Company. The Pokémon Company is the Company’s affiliated company, accounted for by using the equity method. Because of this accounting scheme, the income reflected on the Company’s consolidated business results is limited.
It seems that Nintendo’s investors weren’t aware of the fact that the company didn’t make Pokémon Go; it was Niantic Labs, a firm formerly owned by Google that previously developed the AR title Ingress. As a result, Nintendo’s shares dropped by 18 percent when trading opened on Monday, losing $6.7 billion in market value. That represents the most it’s fallen since 1990.
All is certainly not lost: the game has already proven to be wildly popular in Japan, having clocked more than 10 million downloads there in just a few hours after it launched last Friday. Plus, the game is yet to launch in many other countries around the world.
According to an estimate by Macquarie Securities analyst David Gibson, Nintendo has an “effective economic stake” of 13 percent in the app; the company is forecasting an annual net profit of 35 billion yen (roughly $330 million) in the current fiscal year, up from the 16.5 billion yen ($160 million) it earned last year.