What Nintendo’s Stock Split Means For Investors

What Nintendo’s Stock Split Means For Investors

Getty Images Key takeaways

Nintendo’s stock split Thursday on the Japanese markets, with Nintendo’s ADRs splitting on 1 October

The 10-for-1 stock split is designed to make Nintendo’s shares cheaper, particularly for Japan-based investors

Nintendo is one of a half-dozen Big Tech names to split this year, including Amazon, Alphabet and Tesla

On Tuesday, Japanese gaming giant Nintendo’s stock split 10-for-1, fulfilling a long-desired investor request. The split reduced the per-share price from around 59,700 yen (about $413) on Wednesday to 6,043 yen (about $41.76) by Thursday’s close.

The company hopes that the move will make Nintendo shares more affordable for homegrown investors. In Japan, stocks are typically sold in lots of 100, making one lot of Nintendo worth 5.97 million yen pre-split. (About $41,200 USD.) Post-split, a single lot now costs just 604,300 yen, or just over $4,170 USD.

Retail investors, including existing shareholders, had been calling for a stock split for months to boost liquidity, affordability and reach.

Said Serkan Toto, CEO of Tokyo-based game consultant Kantan Games: “6 million yen is enough to put a student through an entire four-year study program at a Japanese university. It was really about time for Nintendo…to reduce the share price. Now, Nintendo is more affordable, especially for younger people – a type of investor that has been growing in Japan in recent years.”

The split comes at a testing time for tech giants. The 133-year-old game maker faces many of the same headwinds embattling the video game industry at large, including inflation and ongoing supply chain concerns. As a result, Nintendo has seen operating profits and sales decline in recent quarters, as well as hampered shipping abilities.

Still, Nintendo’s products – particularly Switch and Pokémon – remain household names. And its recent drop of Splatoon 3 in Japan beat a domestic record for any Switch software drop in the console’s short-lived history. What is a stock split?

A stock split occurs when a company divides shares of existing stock into smaller, less valuable shares. In Nintendo’s case, a 10-for-1 split meant that each 59,700-yen share would be divided into ten shares each worth 5,970 yen.

While the value of the company and investors’ portfolios doesn’t change, a lower share price has several perks.

More affordable shares can encourage new investment, offer additional liquidity , and allow room for growth. Lower prices also mean that one share commands a smaller concentration of an investor’s portfolio, so existing investors may pile in more.

Some investors see stock splits as a vote of confidence by the company’s board in its brand and future potential. As such, it’s common for investors to bid up stock prices before and after the split, generating some buzz.

And some firms may consider a stock split if they’re aiming to end up in a larger index, such as the Dow , that may set stricter admission requirements that include share prices. Nintendo’s stock split: a bigger deal for domestic shares

Often, when giant corporations announce stock splits, it’s all over the news. Even though splits don’t fundamentally change a company’s value, investors like to trade on the anticipation of value.

So, why didn’t Nintendo’s stock split make a bigger splash?

It’s simple: Nintendo doesn’t trade in the United States – at least, not like “regular” stocks. A brief look at ADRs

You may have noticed that we listed Nintendo’s prices in both Japanese yen and U.S. dollars. That’s not by itself unusual for a huge, multi-national corporation.But as a Japan-based firm, Nintendo doesn’t list on major U.S. stock exchanges like the NYSE or Nasdaq. Instead, it trades on the Tokyo and Osaka exchanges.That means that, technically, U.S. investors can’t invest in U.S.-based Nintendo stock. Instead, American investors can buy Nintendo American Depository Receipts (ADRs).ADRs are over-the-counter certificates issued by U.S. banks or brokerages that represent shares of foreign companies. Each ADR can represent one share, multiple shares, or fractional shares, depending on the setup.These certificates simplify international investing and bypass many of the headaches – like complicated taxes – associated with directly investing in foreign firms. Nintendo’s ADRs Investors tend to be warier of non-exchange-listed securities, which may have reduced the splashiness of Nintendo’s announcement. But that doesn’t mean U.S. investors can’t invest at all.There are two Nintendo ADRs available OTC in the U.S.: NTDOY and NTDOF.NTDOY ADR represents 1/8 of one Nintendo share traded in Japan. (In other words, U.S. investors need to buy 8 NTDOY ADRs to equal one ordinary share.) On the other hand, NTDOF ADR represents one regular share of Nintendo traded in […]

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