Nintendo Shares Drop $6.7 Billion After People Realize They Don’t Actually Own Pokémon Go

July 25, 2016

Investors are frantically trying to sell their Nintendo shares following the Pokémon Go hype.

On Monday, shares in Nintendo Co. dropped nearly 18%, or $6.7 billion in market value, after the company clarified that it’s not the only owner of Pokémon Go. The plummet of Nintendo shares is partly due to the fact that people didn’t have their facts straight.

Nintendo, the Kyoto-based gaming company, has a 32% stake in the Pokémon company, which owns the licensing rights. Pokémon Go was developed and distributed by Niantic Inc., a San Francisco-based company that was once a part of Google. Google and Apple also reportedly get a piece of the Pokémon Go revenue.

Macquarie Capital Securities Senior Analyst David Gibson told Reuters:

“It is unclear exactly what [Niantic’s] economic interest is in the game, but we presume that out of every 100 units earned at the app store, 30 would go to Apple, 30 to Niantic, 30 to Pokémon and 10 to Nintendo.”

Last Friday, Nintendo released a statement saying that the income from its stake in the Pokémon franchise would have a limited impact on its finances.

Nintendo also plans to start selling Pokémon Go Plus, an accessory that notifies players to nearby Pokémon so they don’t have to constantly look at their smartphones. However, the financial gains from that product have already been accounted for in the company’s earnings outlook.

On Monday, the company recorded its biggest drop on the market since October 1990. The stock ended down 17.7%, or 5,000 yen, which is the most a stock can drop in a day on the Tokyo stock exchange.

Gibson surmised:

“The market has overreacted to the Nintendo statement. I believe that Pokemon GO will be material in the company’s earnings given the current trends for the game.”

Nintendo’s market value had more than doubled since the launch of Pokémon Go launch in the United States, Australia and New Zealand on July 6. The Pokémon Go hype led to massive buying in Nintendo shares that added an estimated $12 billion in market value.

The company probably isn’t too worried as its stock price is still approximately 65% higher than before the Pokémon Go release. Bloomberg predicts that Nintendo’s quarterly earnings, which will be announced this coming Wednesday, to be substantially better than last year’s.

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