Nintendo Co. shares plunged by the most since 1990 after the company
said late Friday that the financial impact from the worldwide hit
Pokemon Go will be limited.

The stock sank 18 percent to JPY 23,220 at
the close in Tokyo Monday, the maximum one-day move allowed by the
exchange, wiping out JPY 708 billion ($6.7 billion or roughly Rs. 45,096 crores) in market value.
After debuting in the US earlier this month, Pokemon Go launched in
Japan
on Friday and became available in Hong Kong on Monday.

The
correction comes after Pokemon Go’s release almost doubled Nintendo’s
stock through Friday’s close, adding $17.6 billion (roughly Rs. 1,18,468 crores) in market
capitalization. Nintendo is a shareholder in the game’s developer
Niantic Inc. and Pokemon Co., but has an “effective economic stake” of
just 13 percent in the app, according to an estimate by Macquarie
Securities analyst David Gibson.

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“It’s still possible to say that
in the short-term it’s overheated,” said Tomoaki Kawasaki, an analyst at
Iwai Cosmo Securities Co.

In a press release after the market
closed on Friday in Japan, the Kyoto-based company said the game’s
financial impact will be “limited” and that it is not necessary to
revise its annual forecast even after factoring in current conditions.
It also said revenue from Pokemon Go Plus, a Nintendo-produced accessory
for the game expected to go on sale soon, has already been factored
into the current guidance.

(Also see:  This Pokemon Go Map Will Show You Every Pokemon Location)

“The content of the announcement itself
is not that shocking, but it is a surprise they said it on Friday
instead of when they report earnings” later this week, said Nobuyuki
Fujimoto, a senior market analyst at SBI Securities Co. “The game has
been published in Japan, so for the time being we’ve exhausted all the
catalysts.”

(Also see: Pokemon Go iOS: How to Download Pokemon Go for iPhone, iPad)

The company will report first-quarter earnings on
Wednesday after the market close, a period which ended before the
release of Pokemon Go. The firm is forecasting an annual net profit of
JPY 35 billion in the current fiscal year, up from the JPY 16.5 billion it earned last year.

Short interest in Nintendo surged earlier
this month as bears bet the stock rally had gone too far. As of July 20,
short-sellers had built up a bet worth $940 million (roughly Rs. 6,326 crores) – or 2.6 percent
of outstanding shares – that the stock would fall, according to
researcher IHS Markit. At current prices, such a bet would have
generated about $140 million (roughly Rs. 942 crores) in profits.

(Also see: How to Download Pokemon Go APK, Install, and Play on Android)

Shares of related
companies also fell. McDonald’s Holdings Co. (Japan), the game’s
exclusive launch partner, declined 12 percent. Electronic parts maker
Hosiden Corp., which Mitsubishi UFJ Financial Group said may produce
Pokemon Go Plus, sank 16 percent.

(Also see: How to Play Pokemon Go in India? Here’s Everything You Need to Know)

Besides the earnings
announcement on Wednesday, Morgan Stanley said the next focus point is
if Pokemon Go launches in China, where access to geographical data
necessary for the game is restricted by the government. Investors are
also waiting for announcements on Nintendo’s other upcoming mobile games
and its next-generation console expected to be released next year,
analysts Mia Nagasaka and Yuki Maeda wrote in a July 22 report.

© 2016 Bloomberg L.P.



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