Nintendo’s share price plummets due to Pokemon Go press release

NINTENDO’S market value has plummeted with its share price dropping 18 per cent following a Pokemon Go announcement.

Nintendo dropped by 18 per cent after having an initial rise due to Pokemon Go. Picture: Kazuhiro Nogi

THE global success of Pokemon Go was hailed by many as the thing to return Nintendo back to its former glory — but that idea appears to be short lived.

Nintendo stocks have plummeted after investors realised the company only has a small economic stake in the game.

After launching in the US, Australia and New Zealand earlier in the month, the game quickly became a cultural phenomenon. It was launched in Japan on Friday and Hong Kong on Monday.

The initial success of the game almost doubled Nintendo’s stock, adding more than $20 billion to the company’s market value through to close last week.

However the company issued a press release on Friday in Japan after the market had closed describing the financial benefits that the Kyoto-based company would gain from Pokemon Go as “limited”.

Nintendo Co. owns just 13 per cent of Niantic, the San Francisco-based mobile developer which was spun out of Google and developed and distributed the game.

Nintendo also has just 32 per cent of the voting power of the Pokemon Company, an affiliate company which holds the rights to Pokemon and will receive a licensing fee and compensation for the development of the smartphone application.

“Because of this accounting scheme, the income reflected on the company’s consolidated business results is limited,” Nintendo said in a press release.

“Taking the current situation into consideration, the company is not modifying the consolidated financial forecast for now.”

A man plays Pokemon Go on his smartphone outside of Nintendo's flagship NYC store. Picture: Drew Angerer

The information was by no means new however it served to spook investors nonetheless, shredding the company’s market value by 18 per cent — the biggest plunge in share price since 1990.

Either many investors didn’t know, or they realised the impact the press release would have on the market and made a short term bet to avoid the pain.

But either way, Nintendo clearly felt the need to clarify in a move that has dramatically stifled the bullishness investors showed for Nintendo in recent weeks.

However the big drop was not enough to negate the market gains the company has enjoyed since the release of Pokemon Go. Even with the fallout from the press release, the month of July has been a good one for Nintendo.

The company is expected to report its first quarter earnings later this week.

Nintendo shares took a big hit after the company reminded investors Pokemon Go benefits would be limited.