North American 'activist investor' firm ValueAct Capital Partners LP has nurtured a $1.1 billion stake in Nintendo, it has been revealed.
According to a latter sent to its own investors, ValueAct first began buying the stock in April 2019 and grew its position in the Japanese video game giant during a stock market sell-off in February and March.
However, while most activist investors use an equity stake in a corporation to apply pressure on its management to take the company in certain directions, ValueAct has stressed that it is on the same page as Nintendo's management and that the firm's future is bright.
It has already had "several" meetings with Nintendo's executive team and has a good understanding with current Nintendo president Shuntaro Furukawa. ValueAct adds that there is potential for future growth in the software sector – and there's the opportunity for Nintendo to turn itself into a broader entertainment proposition, like Disney has done with its new Disney+ subscription service.
As a result, ValueAct is not currently pushing for a seat on Nintendo's board, which is what's most activist investors insist on. Instead, it told its own investors, ValueAct will seek to offer behind-the-scenes guidance to Nintendo, calling upon its experience of serving on boards at companies like Adobe and Microsoft.
ValueAct's move to secure a stake in Nintendo marks the third instance of it turning to Japan for new investment opportunities. Last year, ValueAct's Rob Hale joined the board of camera firm Olympus, and a few weeks ago, ValueAct acquired a 7% stake in chip and display materials maker JSR Corp.
ValueAct told its investors that Nintendo was going through a digital transition which would see the company become bigger than ever:
We believe Nintendo will be one of the largest digital media services in the world, in a category with the likes of Netflix, Disney+, Tencent Interactive Entertainment and Apple Music.
Such comments echo the thoughts of video game industry analyst Michael Pachter, who recently said that Nintendo should offer its catalogue of games on a smartphone-based, Apple Music-style subscription service to open up new streams of revenue.
American activist investors are traditionally viewed with some degree of suspicion by Japanese firms, and with good reason. Last year, U.S. firm Third Point launched an activist investment campaign at Japanese tech giant Sony, encouraging the company to sell-off its semiconductor business and dump shares in Sony Financial.
However, ValueAct has said that Nintendo's management has been "welcoming to those who take the time to understand the unique Nintendo way," so it seems for the time being at least, there are no plans to force Nintendo's higher-ups to do anything they're not already comfortable with. Whether than situation will last is something that perhaps won't be answered for some years yet.