For those of you who remember 1989, you’ll probably remember the fall of the Berlin wall, the first Game Boy or when Ice Cube left N.W.A. Nintendo, however, remembers it for altogether reasons, except the Game Boy part (I’m sure they remembered that). 1989 saw the publicly traded shares of Nintendo plummet in price due to the “bursting” of Japan’s “Bubble Economy.”
Flash forward 27 years to July 2016 when Nintendo saw a similar drop in its share price. Like the drop in 1989, another bubble had burst causing the drop in share price. This time, however, the bubble was created entirely by the Pokemon Go app that Nintendo released on July 6.
For those of you who like to dwell beneath a rock, Pokemon Go was a gaming app developed by Niantic and The Pokemon Company for smartphones that involves players finding Pokemon in the real world using augmented reality.
The app was a massive hit and everyone and their grandmother downloaded it onto their smartphone. The “problem” was that most of the share buying market believed that this success was attributed to Nintendo and started gobbling up a bunch of shares in Nintendo, which saw one of Nintendo’s biggest rallies since forever. Nintendo, being the non money loving corporation they are, decided to tell their investors that they are only partial shareholders in Niantic and The Pokemon Company and the success of Pokemon Go will have a limited effect on their revenues. Cue the panic and mass hysteria from uninformed investors who quickly called their brokers and anybody that would listen to start selling their stake in Nintendo. This caused the massive sell off that saw some $7bn wiped off Nintendo’s books. The Pokemon Go bubble had burst.
It wasn’t all doom and gloom, however, as the Pokemon Go rally had added around $12bn to nintendo’s coffers, leaving around $5bn more than it had pre Pokemon Go after the sell off.
For wiser investors, this selling off was actually beneficial as it showed that the market was correcting itself and that Nintendo’s fundamentals are still very strong. This is why this week Nintendo’s stock began to stabilise and return to parity.
Looking over the year ahead for Nintendo, Nintendo itself isn’t predicting many more sales of Wii U than 800k units over the entire 2016 financial year. Followed by a general lack of game releases, prospects for the holiday season for Nintendo are mostly dependent on its mini NES console and its other smartphone apps. Although Miitomo is currently seeing a drop in users, Nintendo will likely want to capitalise on using its own intellectual properties following Pokemon Go‘s success. Animal Crossing and Fire Emblem will see releases soon, but I’m hoping for an official Legend of Zelda port. That’s not too much to ask, is it?
Nintendo will be betting heavily on its next console/handheld hybrid, the NX, but share prices may not see any major increases until sales figures are released which may be a year from now.
Unless, of course, we’re living in a completely irrational, emotional and uncontrollable economy where everything is dictated by public perception, and Nintendo could see its shares roller-coaster with every announcement. Oh, wait.
For those of you interested, Nintendo shares closed up 40 points at 21,005JPY.