The price of shares in Japanese gaming giant Nintendo has slumped due to a number of factors related to smartphone game Pokemon Go.
This week the company admitted that it didn’t not make the game, which was in fact developed by Niantic. However Nintendo does own a stake in the developer as well as 32% of the voting power in the Pokemon Company. In addition share prices tumbled due to the poor commercial performance of the game and a cooling off of initial excitement, according to Sputnik News.
Pokemon Go sees Nintendo share price rocket then plummet
Since Monday Nintendo stock has plummeted as the company admitted that the potential for profits from Pokemon Go are “limited” due to a lack of in-game advertising. Prices fell by 17.7% in Monday trading in Tokyo.
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“It’s still possible to say that in the short-term it’s overheated,” Tomoaki Kawasaki of Iwai Cosmo Securities Co. said.
Nintendo lost $6.7 billion in just one day’s trading as commercial success did not follow on from widespread interest in the game. Millions of people around the world downloaded the game, which is based on the popular Pokemon franchise that was popular among children in the 1990s.
Those children have now grown into smartphone-owning adults, and Pokemon fever struck once again with the release of the augmented reality game. However despite high download rates, Nintendo does not believe that the game will bring in a great amount of profit.
Is Nintendo financially stable?
The announcement on Pokemon Go has stoked suspicions of wider problems at the company.
“The content of the announcement itself is not that shocking, but it is a surprise they said it on Friday instead of when they report earnings,” said Nobuyuki Fujimoto of SBI Securities Co. “The game has been published in Japan, so for the time being we’ve exhausted all the catalysts.”
Since July 6 Nintendo added $17.6 billion in market capitalization due to the popularity of the game. However that could now be wiped out, and stock prices could fall even further due to expenses incurred in the development and promotion of the game.
Nintendo had previously been struggling and many saw Pokemon Go as a surprise savior of the company. The announcement also affected the share prices of McDonald’s, which sponsors Pokemon Go in Japan, and Hosiden Corp, a firm thought to be developing Pokemon Go Plus.