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.