The Nintendo Switch generation has been transformative for Nintendo's business and finances, consolidating development onto one main platform, delivering impressive sales and significantly boosting the company's bank balance. It certainly brings the boom years of the DS and Wii to mind in terms of Nintendo's financial health, and the company has announced a move that gives a good indication of how cash-rich it has become.
Nintendo has issued a "Notification of Acquisition of Treasury Shares and Cancellation of Treasury Shares", which basically means the company will buy back some of its own shares and then 'cancel' them, taking them out of the company's batch of stock. The less shares and shareholders the company has the less it is obliged to pay out on dividends, ultimately.
It's a move only truly possible in highly profitable times. Nintendo aims to buy up to 1.8 million shares between 6th August and 15th September; if it hits that total it'll account for around 1.51% of the company's shares. It's set a limit of 100 billion yen to spend in the acquisitions, which is approximately $912.1 million USD.
Nintendo has stated the following about this planned level of acquisition.
To take advantage of our favorable cash position based on the performance of the Nintendo Switch business over the last few years, we are conducting a buyback of our shares as indicated on this slide.
As an entertainment brand, we strive for sustainable growth and increasing corporate value by offering unique entertainment experiences that play to our strengths. It is essential to have a solid financial base to continue to deliver surprises through our products and services in a business where trends are frequently profound, and the future is often difficult to predict. Based on this belief, we have maintained enough earnings in service of being able to consistently deliver on our mission of creating smiles through uniquely Nintendo experiences.
Effective use of cash continues to be an important management tool. We have a strong cash position thanks to the Nintendo Switch business exceeding our own expectations and as a result have fortuitously gained a renewed opportunity to consider how to most effectively invest our cash in a variety of strategic and meaningful ways. In addition to using a portion of the funds to buy back shares, we will continue to thoughtfully consider how to deploy funds and investments in the future.
This doesn't affect what we typically care the most about - Nintendo games and software. As a financial manoeuvre, though, it highlights how profitable and successful the last 4-5 years have been for the company.
[source nintendo.co.jp, via nintendo.co.jp]
Very, very good move. The less shareholders Nintendo has to answer to, the better. Puts reins back into their own hands. And gives them the opportunity to plan for the long term instead of short term profits.
Every company should strive to do this in my opinion.
It's a small percentage, but IMO gamers should see this as a good thing. Whilst Nintendo always seems to be acting on its own whims, whenever there's shareholders involved the company has some responsibility to them - often making risks less likely. The more Nintendo 'owns themselves', the more autonomy they have and can also take a much more long term view rather than a short term view that's going to pay out dividends.
good for nintendo.
bad for investors.
Here's a thought, maybe invest in, oh I don't know, more developers to make games for your console
Could be beneficial.
Good move though.
Only $900 million, eh?
I'm appalled at this decision. Nintendo should be spending $900 million on a Mario is Missing sequel.
anything that's bad for investors, sounds great for company autonomy!
the obscenely rich who care about profits but don't care about video games, is a demographic that should not be involved in the game industry.
Good for investors who aren't selling.
Fewer shares mean the dividends per share are larger if profit and revenue remain equal.
Heck, it is good for investors who are selling,.as they just found a buyer.
So you have some money for that F-Zero game then, eh?
Probably a smart move for management.
Awesome. Nintendo can Nintendo while they aren't chasing YoY for greedy shareholders with no interest in the hobby outside of personal gain.
@nukatha I dont think it works that way, cause it will also mean that those fewer investor will also have more decision making power (which is contrary to what was expressed in the article).
Companies generally buy back shares for the same reason investors buy shares, because they think the share price will increase. This is Nintendo expressing confidence in its short-term future.
How can Nintendo be in such a strong cash situation with the Switch in a sales slump, they need to wake up and smell the coffee.
@nukatha tell me you don't know how the markets work without telling me you don't know how the markets work.
As a shareholder of Nintendo, I'm pleased.
great, the less shareholders, the better. I hope they keep going hybrid for the next gens, or next immediate gen at the least
@Friendly you should be a big fan of Valve then, that company isn't even publicly traded.
Interesting. I like this idea. The company I work for (completely unrelated to video games btw) has split its shares twice in recent memory.
Sorry Tom but this isn't correct....
"The less shares and shareholders the company has the less it is obliged to pay out on dividends, ultimately"
"A share repurchase shows the corporation believes its shares are undervalued and is an efficient method of putting money back in shareholders’ pockets."
Believe it or not investors are a good thing for a publicly trading company. It means Nintendo can generate cash to make more awesome games, also shareholders want companies they invest in to do as well as possible.
My current Nintendo positions are down around 7% so this share buy-back is coming at a good time for Nintendo when share price isnt at a high it was earlier in the year.
Note - I only recently started investing in Nintendo
@WhiteUmbrella ah didn’t know that. But yeah, i’m a big fan of companies with only internal shareholders. Internal only stock market. At least as an employee you know who you’re working for, who is actually earning which amount of money.
Much less prone to money-grabbers.
Here’s a question that someone might be able to answer: would a buyback like this be a potential strategy to ensure a larger company like Microsoft or Apple from buying gobs of shares, become a majority owner, and basically hijacking ownership of the company?
I’ve heard and read about such things but my own understanding on it is foggy. It might be far-fetched, maybe totally possible, I’m not sure.
Nintendo needs to hired more devs or buy up new studios for their platform, maybe buy MercurySteam, Shin'en, Treasure, WayForward, and Panic Button and had them make more awesome original games or revive old/cancelled ones like F-Zero, StarTropics, 1080, Wave Race, Kid Icarus, Starfy, Eternal Darkness, Sadness, Raven Blade, Pandora's Tower, Trace Memory, Soma Bringer, Geist, etc.
Now this is great news. I remember when there were calls for Iwata to do this during the WiiU era and he rebuffed it - between the lines they didn't have the cash in a position to do it.
More self ownership is best. Back in the "golden age" of Nintendo they were 100% privately owned, and that's when we got most of the innovation they're still milking today.
@RobotReptile it's probably too small a buy to have any real effect, but yes, buybacks can be used to help rebuff hostile takeovers. They'd probably need to buy a lot more than this, but ultimately, the closer a company gets to majority ownership of itself (this isn't it) the more the management can do whatever it wants without answering to anyone, and the more than can simply say "no" for any buy attempt.
Hopefully they will spend some money making N64, GameCube and Gameboy games available??
So is it worth buying some now for a quick profit?
Agreed. Look at Disney and the fiascos they've wrought because they're trying to make the most profits for their shareholders (shareholders apparently want investment in D+ full stop, screw the talent and everything else the company does).
Covid was the best thing to ever happen to multi billion dollar gaming corporations
Good for Nintendo. They could always sell bonds to buy them back like Amazon is doing.
Do you people not understand when Nintendo buy these shares back, they get cancelled? This does not give Nintendo more ownership of the company. It increases the value of the left over shares for their existing shareholders lol.
@eltomo "So is it worth buying some now for a quick profit?"
Anybody who tries to play the stock market as a "get rich quick" scheme usually finds that it's more "get poor quick". It is extraordinarily difficult to beat the market. Long-term investments in mutual funds are your best bet.
For greater stability?
The less shares and shareholders the company has the less it is obliged to pay out on dividends, ultimately.
This helps them focus on innovations and R&D to makes us buy more is what that means.
I'm listening Nintendo.......Make me an offer I can't refuse! I'd take $75,000 per share I guess.......I mean, if you twisted my arm
@SwitchForce No that assumption in the article is completely false and should be removed in my opinion. Looking at how Nintendo pay out dividends (https://www.nintendo.co.jp/ir/en/stock/dividend/index.html) to investors and considering that these share will be cancelled once bought back. Investors are set to receive a higher payout. This action is to increase the overall value of investors shares not 'take back control' from outside influence.
Ouch, since a 2021 high of $72 a share, back in june, it is now sitting at $62 and dropping. I guess now is a good time to buy back shares.
@originaljohn Shares goes up and down.
Ah... I love seeing Nintendo be successful.
That’s like £180,000
Amazing that all that just equates to only 1.x percent of the total shares. Surely that means it can't be too much of a "strategic" move (since it's not exactly changing the lay of the land) but more something which will pay off in raw dollars before too long.
@MJF might not be too bad for investors. This will lessen the impact of short selling, no? And might increase scarcity when the shares are going up, therefore inflating price.
Doesn't strike me as a great thing like the article and comments seem to think it is. I'd rather see the company re-invest in itself such as by upping the capacity of its 1st party development capabilities.
Reducing the number of shares on the marketplace does little for anyone except those that now will own a little bigger slice of Nintendo for their share of stock, with Nintendo retiring up to 900 million dollars worth of their own stock. It won't reduce outside influence or reduce dividend payouts.
And while I've done nothing stock market related as a career, if I remember classes talking about it when I went for my MBA, this move is often done when a company feels like their stock is undervalued (i.e., Nintendo thinks their stock is worth more than the investing community, Wall Street, and so on do and is trying to inflate the value). That's not a great thing to have happen, but we'll have to wait and see if Nintendo's expensive move succeeds in inflating the value to the level Nintendo perceives it should be at.
Basically, they're sitting on a pile of cash, and feel that the company is already operating at capacity. As such, share buyback is a good use of that pile of cash. Alternatively, they could expand operations with the money, but the more things you do, the more difficult it is to track everything. Nintendo is a VERY Japanese company, and thus very conservative in financial decision-making, and doesn't want to expand to the point of crashing and burning.
@rockodoodle a simple google search will show you what happens to investors when a company buys back their stocks
@Pokester99 Must be very lucky. Still have an OG Switch and the joy cons it came with. Zero drift.
Buy OTC pennies by the multi-millions and wait for 5 months to 1-2 years
Been my winning strategy (balls of steel and ultra patience) for the past 10 years. Here's my third account from earlier this year:
They should give staff a pay rise
@datamonkey If they weren't a publicly traded company, this would/could be more likely to happen. But, as a publicly traded company, they almost all go this (stupid, imo) route of stock buybacks that prop up the price. Apparently, stock buybacks used to be illegal until 1982.
Now, what could Nintendo have done with $900 million instead?
Nintendo has around 6,000 employees worldwide (5,944 according a quick google search), and let's say they divided that amount equally among just their employees, how much would each employee get?
900,000,000/5,944 = About $151,413 per employee (if my math is right).
Now, as an employee, would you rather your company buyback stocks, or would you rather your company give you a one year bonus of $150,000?
Aside from their dinosaur executives making horrible decisions, it's the share holders that are even worse for the company. People who don't even care about gaming making decisions on gaming? Yeah, enough of that.
@Pokester99 Just because everyone that ever has had drifting issues are very vocal about it on internet doesn't mean it's a huge issue. I got four joycons and a pro controller, zero issues here. The Pro controller on the other hand has the biggest design flaw ever seen in a controller, and still it's addressed the least, which I find odd as it's present in all of them and not just a few (the d-pad). But I guess it's because most use the working non-drifting joystick for walking instead?
@CoffeeWithGames yeah exactly!
It would be nice even if they just gave every employee $5k. They’d still have the majority of that money to use as buybacks.
Shame we’re not in charge lol!
Nintendo got LONG money.
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