Nintendo Stock Plummets As Investors Finally Realize Company’s Limited Stake In Pokemon Go’s Success

Investors eager to ride what they assumed was the gravy train created by Pokemon Go didn't do their due diligence before rushing out to buy shares of Nintendo. Not that Nintendo minded—its market capitalization more than doubled to 4.5 trillion yen ($42.5 billion) as its share price shot up since Pokemon Go released to mobile devices a few weeks ago. But after Nintendo issued a notice downplaying how much revenue it actually stands to gain from the Pokemon Go craze, investors reacted by sending the company's stock price on a downward spiral.

The full effect of Nintendo's disclosure is yet to be determined. In the immediate aftermath, Nintendo's share price plummeted nearly 18 percent to 23,220 yen, the maximum single-day limit on the Tokyo Stock Exchange. It could end up falling even further, a scary thing for Nintendo which just watched its market capitalization drop by $5.6 billion in a single day of trading.

Pokemon Go

Pokemon Go is a mobile phenomenon. It set the record for most downloads ever in Apple's App Store during its launch week, an especially notable feat considered it initially launched in just three markets, including Australia, New Zealand, and the United States. It's since been made available in other territories, including a launch in Japan last Friday.

As successful as Pokemon Go is, Nintendo doesn't stand to make a fortune off of the freemium title. That's because it only receives a portion of the financial rewards.

"This mobile game application is developed and distributed by Niantic, Inc. The Pokémon Company, which is an affiliated company of Nintendo Co., Ltd. (the 'Company'), holds the ownership rights to Pokémon. The Pokémon Company is going to receive a licensing fee as well as compensation for collaboration in the development and operations of the application," Nintendo clarified to investors.

There are several hands in the cookie jar. Apple and Google get a cut of the revenue from hosting the app in their respective app stores, and the rest is divvied up between Niantic, The Pokemon Company, and Nintendo, with Nintendo owning a 32 percent stake in The Pokemon Company. Nintendo's share of whatever fortune comes from Pokemon Go is relatively small.

The other downer for investors was the revelation that anticipated sales from the forthcoming Poke Go Plus device, a peripheral that can be used with the mobile title, have already been accounted for in its previous financial forecast.

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