Pokémon Go has been a runaway success. It’s revived a decades-old brand and brought it to new audiences, pushed fan subreddits to dizzying highs and even beaten out Tinder in app popularity. Nintendo stock has soared as one of its iconic brands is back in the limelight once more.
There’s just one problem: Nintendo doesn’t technically make Pokémon Go. When investors realized, they didn’t take the news well, plunging the stock toward the Tokyo exchange’s maximum drop limit.
The company released a statement on Friday that the success of Pokémon Go would not have a major impact on the company’s finances. Here’s the damning part of the statement (emphasis is ours):
[Nintendo] owns 32% of the voting power of The Pokémon Company. The Pokémon Company is the [Nintendo’s] affiliated company, accounted for by using the equity method. Because of this accounting scheme, the income reflected on [Nintendo’s] consolidated business results is limited.
The upcoming Pokémon Go Plus accessory had already been factored into Nintendo’s financial guidance, ahead of its earnings report due later this week.
Pokémon Go was developed by Niantic, a game developer that previously released Ingress, and The Pokémon Company. The latter is a game developer established in 1998 as a joint investment between Nintendo, Game Freak, and Creatures. Nintendo holds shares in both The Pokémon Company and Niantic, but its stake in Pokémon Go’s success amounts to just 13 percent.
The stock dropped by a staggering 18 percent by end of trading Monday, bordering on the Tokyo stock exchange’s rules that prevent share prices from moving too much.
In some ways, this is surprising. Nintendo wasn’t hiding its relationship with The Pokémon Company, but the timing of the drop suggests investors maybe thought that the game’s unparalleled success would filter back through to the Mario maker.
Nintendo stock hasn’t done particularly well in recent years when compared to the heady days of the Wii. The launch of the underwhelming Wii U dented investor confidence in the company’s home console offerings. With Pokémon Go apparently not the company’s magic bullet it was once assumed to be, Nintendo will likely look to the mysterious NX console as its next potential source of momentum.
Here’s that Nintendo statement issued after trading closed on Friday: