Nintendo has announced a 10-for-one stock split to address longtime investor calls to improve corporate governance at the Kyoto-based games maker.
The unexpected move would finally allow retail investors to invest in the creator of Mario and Donkey Kong by making shares cheaper to acquire. Other global tech companies, such as Amazon, Alphabet and Tesla have announced similar plans in recent months.
Investors will receive 9 additional shares for every one they hold, multiplying the total number of outstanding shares but reducing the value of each share.
With the stock trading at ¥56,360 ($433) on Tuesday, investors would at present need about $43,250 to buy the shares because of a minimum trading limit of 100 shares. The stock split from October 1 would bring that figure down to $4,325.
Nintendo also projected a 29 per cent year-on-year decline in net profit for the current fiscal year to ¥340bn as its president Shuntaro Furukawa warned that global chip shortages would continue to weigh on the production of its popular Switch gaming console.
The company said on Tuesday that it expected to sell 21mn Switch consoles for the fiscal year ending next March, compared with the 23mn units it sold in the previous year. Nintendo forecasts revenue to fall 6 per cent to ¥1.6tn.
Nintendo has sought to maintain demand for its Switch console after five years on the market with the launch of a new model using an OLED screen last October and new software for popular titles.
While Furukawa expressed confidence that the company would sell more than 20mn units of its consoles, he also pointed to lingering uncertainty over the supply of semiconductors.
“Share split has been a dream over the past years for retail investors because [the] Nintendo share price was too high for them,” said industry analyst Serkan Toto, noting that Nintendo was one of the most heavily traded stocks on the Tokyo Stock Exchange.
He added that Nintendo was in a relatively better position to procure components, including chips, as the core technology used for the Switch was dated and easier to access compared with rivals Sony and Microsoft.
On Tuesday, Sony lowered its annual forecast for sales of its PlayStation 5 game consoles to 18mn from an initial target of 22.6mn because of continuing component shortages.
Hiroki Totoki, chief financial officer, said Sony’s sales forecast for PlayStation units, the delivery of which has also been slowed by logistics disruptions during the Covid-19 pandemic, reflected the number of consoles for which the company was confident it could procure the components necessary for production.
He added that demand for the consoles was probably “slightly higher” than the forecasted number but warned that if the coronavirus situation in China got worse, there might be further lockdowns that could negatively impact the projection. Sony sold 11.5mn units last year.
Sony also said it would buy back ¥200bn of its shares and forecast operating income of ¥1.16tn for the current fiscal year, slightly below the analyst estimates of ¥1.2tn.