Nintendo issues reminder it didn't make Pokémon Go, stock slumps 18%
$6.7 billion wiped from Nintendo's market cap in its biggest one-day drop since 1990
Last Friday, Pokémon Go finally launched in Japan, but what should have been a cause for celebration actually brought a correction to one of the biggest runaway success stories of recent years.
According to SuperData, Japan's mobile games market is worth $6.2 billion in revenue a year. With Pokémon Go achieving astounding levels of success in the US and a growing number of countries around the world, its arrival in the country in which the IP was created promised great things.
However, while those great things might still arrive, Nintendo chose the moment as the best time to issue a reminder to its shareholders: it did not develop or distribute Pokémon Go, nor does it hold the ownership rights; rather, Niantic Inc. developed the game in partnership with The Pokémon Company, an affiliate in which Nintendo holds a 32% stake.
"The Pokémon Company is going to receive a licensing fee as well as compensation for collaboration in the development and operations of the application," Nintendo said. "The Pokémon Company is [Nintendo's] affiliated company, accounted for by using the equity method. Because of this accounting scheme, the income reflected on [Nintendo's] consolidated business results is limited."
Pokémon Go's meteoric rise may have prompted Nintendo's stock price to double, pushing its market cap past Sony, but Nintendo has instructed its shareholders that it will not be altering its financial forecast for the year ending March 31, 2017. "The Company will make a timely disclosure when the Company needs to modify its financial forecasts," Nintendo said, managing expectations ahead of the release of its Q1 results later this week.
However, that clarification caused Nintendo's stock price to drop as quickly as it rose, plunging 18% between the close of trading on Friday and the close of trading today - with 18% the maximum movement allowed in a single day by the Tokyo exchange. Nintendo shares are currently trading at ¥23,220, meaning that around $6.7 billion has been wiped from the company's value in, effectively, a single day.
Bloomberg has suggested that Nintendo's "effective stake" in Pokémon Go's success is equivalent to 13% of its revenue. Nevertheless, the association between the IP and Nintendo's brand is strong, and the game's popularity remains undimmed. A panel at San Diego Comic-Con with Niantic CEO John Hanke was originally scheduled for a tiny room. It was subsequently upgraded to the hallowed Hall H, where nearly all of its 6,000 seats were filled.