Nintendo announced a 10-for-1 stock split on Tuesday as the Japanese gaming giant aims to make its shares more attractive to retail investors.
Shareholders have been arguing for a stock split for some time to increase the liquidity of the gaming giant’s shares. The move will take effect on October 1 of this year, when each common stock will be split into 10 shares.
A number of major technology companies, including: Apple aand Amazonto have announced stock splits in recent years† They don’t fundamentally change the company in any way, but they do make a single stock cheaper, which could make it more attractive to retail investors.
Stock splits are usually positive for a company’s stock price. Nintendo shares are up 5% this year despite other big tech companies losing billions of dollars in value this year amid a sharp sell-off of risky assets.
The Kyoto-headquartered company also announced plans to repurchase 56.36 billion Japanese yen ($432.9 million) worth of shares. The transaction will take place on Wednesday.
Nintendo’s surprise announcement of the stock split came as it reported earnings for the fiscal year ended March 31. Sales were 1.69 trillion Japanese yen, a 3.6% year-over-year decline. Net profit fell 0.6% to 477.6 billion yen.
Part of that weakness is due to a decline in Switch sales, despite the company launching a new OLED (organic light-emitting diode) model during the fiscal year. Sales of the console range were 23.06 million units last fiscal year, down from 28.83 million in the previous 12 months.
Nintendo said Switch sales were “affected by shortages in semiconductor components and other parts.”
The Japanese giant forecast sales of 21 million units of the Switch in its current fiscal year ending March 2023, a 9% year-over-year decline.
Nintendo warned that if Covid-19 restrictions hamper production or transportation, it could affect product delivery. The company also said the production of products may still be affected by difficulties in sourcing parts such as semiconductors.
Despite a decline in Switch sales, console players continued to buy Nintendo’s games. Software sales grew 1.8% in the past fiscal year, driven by demand for popular games, including “Pokemon Legends: Arceus” and “Mario Kart 8 Deluxe.”
Nintendo said it now has 100 million users a year. The Japanese giant has a strong portfolio of recognized characters and games that it has benefited from throughout its history. Meanwhile, Sony and Microsoft have been trying to build their so-called first-party games by acquiring game production companies or setting up studios of their own.
Nintendo said sales of its Switch game console fell in the fiscal year ending March 31 due to supply chain constraints, including a shortage of semiconductors. The Japanese gaming giant expects another drop in Switch sales in the currency’s fiscal year.
Behrouz Mehri | AFP | Getty Images
In January, Microsoft announced plans to buy Activision Blizzard for $68.7 billion while Sony agreed to to acquire video game maker Bungie for $3.6 billion†
Nintendo has a strong pipeline of upcoming games, including “Nintendo Switch Sports,” but expects to move 210 million software units in the year to the end of March 2023, a 10.7% year-over-year decline.
However, an analyst finds Nintendo’s guidelines too conservative. Serkan Toto, CEO of Tokyo-based consultancy Kantan Games, said the drop in software revenue is leaving him “bewildered”.
“We are only a few weeks into the fiscal [year], and Nintendo’s pipeline of first party games already includes eight titles. They just launched ‘Switch Sports’, ‘Splatoon 3’ is coming in September and will be followed by a new open world Pokémon game. The hardware installation base will also increase,” Toto told CNBC.
“Why the hell are they predicting a reduction in software? It doesn’t make any sense.”