The Switch-led successes for Nintendo over the last five years have enabled the company to once again generate significant profits and enhance its already impressive cash reserves. While investment has clearly gone into game development, will continue in terms of hardware R&D, and of course into major collaborations in areas like theme parks and the upcoming Mario movie, the company has also used its cash wealth for some other accounting and financial manoeuvres.
In August last year the company outlined plans to spend up to $900 million buying back shares to then 'cancel' them, a move to adjust the balance of company finances and investments. In today's annual financial results a similar plan was outlined, though there is a key difference in the focus.
Nintendo is going to spend up to 56,360,000,000 Yen (approximately $432 million US dollars), limited to 1 million shares (0.85% of remaining shares in the company) prior to trading opening in Tokyo on 11th May. The purchase is being made at the closing price of 56,360 Yen, valid as of today (10th May), and this time the shares won't be 'cancelled'.
The reasoning given for this is quite limited, though this is only a part of the various movements and changes Nintendo is making to its company shares and stock (which we'll cover in due course).
To improve capital efficiency as a flexible capital policy in accordance with the changes in the business environment.
It's another notable (and sizeable) investment in buying back its own shares, showing that the company has a focus on leveraging and taking advantage of its current strong financial position.
We'll cover more of these stock manoeuvres through the day.
[source nintendo.co.jp]
Comments 5
Interesting.
They spend only half of what they originally suggested, but they're getting five times as many shares anyway, because of the 10/1 split they also just announced.
Seems like the smarter investment for several reasons, even if the share prices are, naturally, also reduced to a tenth initially.
What percentage of Nintendo is actually publicly traded, anyway? I doubt they'd let themselves be bought out, but the thought of someone buying up enough stocks to have significant influence over them is still concerning.
@Anachronism Their biggest shareholders are some Japanese banks.
I'll be the first to admit I don't understand their reasoning here.
But if an expert in finance cares to chime in and explain this, I'd certainly be grateful.
@JaxonH
Not exactly an expert, but I think they reconsidered after the MS buyout of Actiblizz. Instead of canceling shares to keep existing prices high, they're going for a stock-split, which allows a massive influx of share-holders and a potentially much higher market cap.
Both would help to guard Nintendo against hostile takeovers.
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