Nintendo shares plunge on Pokemon profit fears
“Nintendo said the accounting scheme for recognising revenues from Pokemon Go meant its profits would not materially change”.
That leaves us with a contingent of investors who had no idea how the game is related to the company…
The irony
con·tin·gent kənˈtinjənt/ noun noun: contingent ; plural noun: contingents** 1**. a group of people united by some common feature, forming part of a larger group. “a contingent of Japanese businessmen attending a conference” synonyms: group, party, body, band, company, cohort, deputation, delegation; More
This doesn’t mean there’s no value in Pokemon Go to Nintendo. They just need to recognize this in different ways. Apparently, the rights to Pokemon brand is owned by a spun off company, actually called “Pokemon Company”. Nintendo owns a 32% stake in Pokemon Company. So if Pokemon Company recognizes the income from Pokemon Go, presumably its value will increase, along with Nintendo’s earnings. It’s just not clear how/when they can mark this profit.
Apple and Google are actually the biggest winners out of this.
I am sure Pokemon Go is a financial hit but the way shares plunged on the news is rather curious.
I mean, isn’t this type of info normally disclosed in annual reports? The percentage holding and revenue recognition/accounting policies?
A careful and disciplined fundamental analyst could have actually extracted this info from financial reports. And guess what? It would have been deemed inside information, since the news came as a significant surprise!
The amount of stupidity in the market is astounding, took me about 1 min of research to find this out… you’d think the profit sharing scheme would be one of the first things any investor would look at first…
Massive informational assymetry and irrational behavior indeed.
^Eh, just following the charts and castles in the sky. Most of the buyers near the recent high have no concern about the fundamentals. Covering shorts or hoping for the greater fool. The game was the catalyst that got the “game” started and laid the foundation for the castle…
fundamentally it doesn’t matter. the profits are still attributed to Nintendo, whether its through an investment or directly on their own balance sheet. to fall that much because of a difference in the control of profits (1/3 voting power versus full voting power) is ridiculous considering NTDOY has ~US$8B in cash on its balance sheet that it does nothing with. the bounce starts tomorrow.