Nintendo’s stake in Pokemon GO is somewhat of a mystery. At launch, Nintendo saw an overwhelming increase in share prices. According to the Street and just about any other financial news reporting service, Nintendo’s capitalization has doubled in the two weeks that Pokemon GO has been released to the public. This has many wondering if there is a lot of growth left in Nintendo stock.
Even Nintendo themselves have warned people about being cautious when it comes to putting too much emphasis on Nintendo’s role in Pokemon GO. Nintendo released a special statement on July 22 regarding the impact of Pokemon GO on financial statements. In it, Nintendo points out that the Pokemon Company hold ownership rights to Pokemon.
Nintendo holds a 32 percent share of the Pokemon Company. For this reason, Nintendo has opted not to modify any forecasts as it pertains to where they think the company is going financially in the next fiscal year. Of course, this has caused game and financial sites to downplay the impact that Pokemon GO may have on Nintendo’s future moving forward. This begs the question: What will Pokemon GO do for Nintendo?
Trying to unravel the mystery of who gets what from Pokemon GO is a task in and of itself. Niantic is a spinoff company of Google. Fortune makes the assumption that Google still benefits a great deal from Pokemon GO’s success. The fact that neither Niantic nor Google elects to comment goes a long way to corroborating the assumption.
However, the real question everyone has is what Nintendo is going to make off of this deal. Of course, there will soon be hardware developed by Nintendo that will exclusively be used with GO, the Pokemon GO Plus. The wearable device is set to be released worldwide on July 31. It retails for $35, and it is currently sold out. Nintendo will stand to make a great deal of money on the device alone.
Now, here is the confusing part: The Pokemon Company. Nintendo stated in the special statement that they have a 32 percent stake in the voting rights of the Pokemon Company. There are two other partners involved in the company, Game Freak and Creatures. Who then is Game Freak and Creatures?
Nintendo World Report attempted to break down this question in September 2015. According to the site, Game Freak is the chief video game designers behind the Pokemon portable games. Game Freak was created by Satoshi Tajiri and Ken Sugimori as a game magazine. It was eventually reorganized into a video game company.
Creatures seems to be the wild card in this equation. Creatures was originally a subsidiary of a company called Ape Inc., which was responsible for the Nintendo Earthbound/Mother series. They currently handle the trading card game side of Pokemon. Much of the 3D modeling is actually done by Creatures.
There you have it: the three companies that make up the Nintendo Company. Clear as mud, right? What is even more confusing is the fact that Creatures and Game Freak are both privately-owned companies. With private ownership comes a certain degree of anonymity. This basically says they do not have to divulge breakdown of the ownership of the company.
What this means to an investor of Nintendo stock is that they have to take Nintendo’s word for it that Pokemon GO will have little effect on the bottom line of the stock. However, it has been speculated from legitimate sources such as the Nintendo Voice Chat Podcast from IGN that Nintendo does, in fact, own a good portion of at the very least Creatures and possibly even Game Freak.
What does Nintendo gain from the special statement issued? Is Nintendo’s stake in Pokemon GO something they can use to manipulate earnings for the next six months? Is Nintendo simply electing to downplay their short term success garnered by Pokemon GO to surprise shareholders at the end of the next fiscal with better than expected earnings for this year. It seems likely.
[Image via The Pokemon Company]