Nintendo’s Pokemon Go problem

By Crispin Heath on Thursday, 28 July 2016

After Nintendo shares boomed with the release of Pokemon Go, they have now fallen dramatically as investors realise that the company doesn’t actually make the game.

In fact, Nintendo themselves felt compelled to put out a statement at the end of trading last Friday, pointing out that the instant, global success of Pokemon Go will have a ‘limited’ impact on the company’s bottom line.

Nintendo owns 32% of The Pokemon Company, which has developed Pokemon Go in collaboration with AR developer Niantic Labs, and had already accounted for its share of Pokemon Go revenue in its current forecasts.

As a result, shares fell on Monday, at one point down 17%, just 1% away from the Tokyo stock exchanges protection mechanism that doesn’t allow share prices to move more than 18% in a single day.

This is an interesting - and understandable - case of commercial success, global enthusiasm, and quite a bit of bandwagon jumping, getting the better of rational, properly thought-through investment.

The good news is that Nintendo will soon be releasing its own proprietorial mobile games, based on the Animal Crossing and Fire Emblem franchises. While Pokemon Go may not be directly filling the company’s coffers, it does show the incredible potential for Nintendo’s IP in the smartphone space.

So, it may be worth hanging onto those shares after all.

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