The revelation led to Nintendo’s stock losing $6.7 billion in value over the weekend as opportunistic investors shed their recently purchased shares.
Nintendo’s recent market surge was due in large part to the strength of the Pokémon brand, as investors apparently didn’t even bother launching the Pokémon Go app for themselves before sinking millions into Nintendo stock over the past week. Pokémon Go‘s initial loading screens make no mention of Nintendo, and the company’s distant relationship with the Pokémon brand is clearly stated across multiple freely searchable online resources.
Though its game consoles are closely tied to the Pokémon brand, Nintendo actually shares Pokémon’s copyright with franchise creators Game Freak and Creatures Inc. Together, the companies profit from the brand via The Pokémon Company, a Japanese firm that controls marketing and licensing. Nintendo currently owns a 32 percent stake in The Pokémon Company.
Over the past week, investors failed to realize that The Pokémon Company — not Nintendo — was responsible for funding, licensing, and greenlighting Pokémon Go, entitling it to the bulk of profits. Nintendo noted in a wake-up call to investors over the weekend that it will see very little of the revenue generated by Pokémon Go reflected in its financial forecast.
“[Nintendo] owns 32 percent of the voting power of The Pokémon Company,” Nintendo explained in its letter to investors. “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.”
The letter continues: “Taking the current situation into consideration, [Nintendo] is not modifying the consolidated financial forecast for now. [Nintendo] will make a timely disclosure when [Nintendo] needs to modify its financial forecasts.”
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