What's the market value of a Pokémon game that Nintendo's parent company only kinda sorta controls and publishes? About $9 billion.
That's how much value Nintendo's stock has gained since last Wednesday, with the shares shooting up 25% on Monday alone. In total, they have risen by almost 40% since the release of Pokémon Go, reflecting investors' glee at Nintendo finally using its beloved characters and intellectual property to make a hit mobile game.
The gaming giant has largely sat out the mobile era, focusing instead on making games for its own consoles. But now that is has a smash hit on its hands — one that sits atop the iOS App Store for free and top-grossing apps despite bugs, connectivity issues, alleged armed robberies, and one Wyoming teen finding a dead body while playing it. Nintendo was valued at almost $28 billion on Monday afternoon.
But the company won't be collecting all the money generated by Pokémon Go. Instead, it owns stakes in both the Pokémon Company and Niantic, the game's developer, which spun out from Google's parent company Alphabet last year.
Analysts at the Japanese investment bank Nomura said that the huge surge in Nintendo's stock price "looks excessive based on profits from Pokémon Go alone," which they estimated to be only about $10 to $20 million annually for Nintendo itself.
It's not just one game that is driving frenzied trading in Nintendo stock. If the company turns out to be capable of pumping out a stream of breakout mobile games, it's worth a lot more than one whose fortunes are tied to its own consoles. Successful mobile games are pretty much a license to print money, and have been valued by the industry on such terms: Chinese messaging company Tencent recently bought a majority stake in Clash of Clans developer Supercell, in a deal that valued the game maker at over $10 billion.
Safety concerns have been one reason Nintendo moved so slowly into mobile gaming. "We will not do anything that may hurt Nintendo IP. We will not do anything that may hurt Nintendo’s brand image — that parents can feel safe giving their children access to it," the company's then-Chief Satoro Iwata told Time last year. (Iwata died of cancer last July.)
While Nintendo announced last year that it would develop mobile games with DeNA, the Miitomo game didn't feature any of the characters people love; the company has said it will release two more mobile games.
"We have come to the stage where we can say that we will be able to develop and operate software which, in the end, will not hurt the value of Nintendo IP but, rather, will become an opportunity for the great number of people around the world who own smart devices," Iwata told Time.
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at firstname.lastname@example.org.
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