Nintendo loses $6.4 billion in value after it says Pokemon Go will have a limited effect on earnings

The value of video game maker Nintendo, which had risen $17.6 billion since the release of Pokemon Go, gave back $6.7 billion in valuation on Monday. The 18% decline was brought on by a number of factors, including the quick doubling of the stock over the last couple of weeks. But the main catalyst for the drop was a comment made by the company on Friday stating that the game would have a limited financial impact on the company. Nintendo said that even with the wild success of the game, there was no reason to revise its annual earnings forecast upward.

Nearly two weeks ago, we said that investors were jumping the gun by purchasing Nintendo stock. Not only is the game free, but Nintendo only gets slightly more than a 10% cut of in-app revenue. Those who came to the same conclusion we did and shorted the stock, made an estimated $140 million from today's drop in value. Selling short is basically the reverse of buying low and selling high. Sellers borrow the shares and sell them, profiting if the stock declines. 

The company will report fiscal first quarter results Wednesday. But that three month period ended before the launch of Pokemon Go. Still, the company could announce estimates for its fiscal second quarter earnings which would include results from the AR game. We also could hear more about the next mobile game coming from the company.

source: Bloomberg