Key takeaways
- Nintendo’s stock split Thursday on the Japanese markets, with Nintendo’s ADRs splitting on 1 October
- The 10-for-1 stock split is designed to make Nintendo’s shares cheaper, particularly for Japan-based investors
- Nintendo is one of a half-dozen Big Tech names to split this year, including Amazon, Alphabet and Tesla
On Tuesday, Japanese gaming giant Nintendo’s stock split 10-for-1, fulfilling a long-desired investor request. The split reduced the per-share price from around 59,700 yen (about $413) on Wednesday to 6,043 yen (about $41.76) by Thursday’s close.
The company hopes that the move will make Nintendo shares more affordable for homegrown investors. In Japan, stocks are typically sold in lots of 100, making one lot of Nintendo worth 5.97 million yen pre-split. (About $41,200 USD.) Post-split, a single lot now costs just 604,300 yen, or just over $4,170 USD.
Retail investors, including existing shareholders, had been calling for a stock split for months to boost liquidity, affordability and reach.
Said Serkan Toto, CEO of Tokyo-based game consultant Kantan Games: “6 million yen is enough to put a student through an entire four-year study program at a Japanese university. It was really about time for Nintendo…to reduce the share price. Now, Nintendo is more affordable, especially for younger people – a type of investor that has been growing in Japan in recent years.”
The split comes at a testing time for tech giants. The 133-year-old game maker faces many of the same headwinds embattling the video game industry at large, including inflation and ongoing supply chain concerns. As a result, Nintendo has seen operating profits and sales decline in recent quarters, as well as hampered shipping abilities.
Still, Nintendo’s products – particularly Switch and Pokémon – remain household names. And its recent drop of Splatoon 3 in Japan beat a domestic record for any Switch software drop in the console’s short-lived history.
What is a stock split?
A stock split occurs when a company divides shares of existing stock into smaller, less valuable shares. In Nintendo’s case, a 10-for-1 split meant that each 59,700-yen share would be divided into ten shares each worth 5,970 yen.
While the value of the company and investors’ portfolios doesn’t change, a lower share price has several perks.
More affordable shares can encourage new investment, offer additional liquidity, and allow room for growth. Lower prices also mean that one share commands a smaller concentration of an investor’s portfolio, so existing investors may pile in more.
Some investors see stock splits as a vote of confidence by the company’s board in its brand and future potential. As such, it’s common for investors to bid up stock prices before and after the split, generating some buzz.
And some firms may consider a stock split if they’re aiming to end up in a larger index, such as the Dow, that may set stricter admission requirements that include share prices.
Nintendo’s stock split: a bigger deal for domestic shares
Often, when giant corporations announce stock splits, it’s all over the news. Even though splits don’t fundamentally change a company’s value, investors like to trade on the anticipation of value.
So, why didn’t Nintendo’s stock split make a bigger splash?
It’s simple: Nintendo doesn’t trade in the United States – at least, not like “regular” stocks.
A brief look at ADRs
You may have noticed that we listed Nintendo’s prices in both Japanese yen and U.S. dollars. That’s not by itself unusual for a huge, multi-national corporation.
But as a Japan-based firm, Nintendo doesn’t list on major U.S. stock exchanges like the NYSE or Nasdaq. Instead, it trades on the Tokyo and Osaka exchanges.
That means that, technically, U.S. investors can’t invest in U.S.-based Nintendo stock. Instead, American investors can buy Nintendo American Depository Receipts (ADRs).
ADRs are over-the-counter certificates issued by U.S. banks or brokerages that represent shares of foreign companies. Each ADR can represent one share, multiple shares, or fractional shares, depending on the setup.
These certificates simplify international investing and bypass many of the headaches – like complicated taxes – associated with directly investing in foreign firms.
Nintendo’s ADRs
Investors tend to be warier of non-exchange-listed securities, which may have reduced the splashiness of Nintendo’s announcement. But that doesn’t mean U.S. investors can’t invest at all.
There are two Nintendo ADRs available OTC in the U.S.: NTDOY and NTDOF.
NTDOY ADR represents 1/8 of one Nintendo share traded in Japan. (In other words, U.S. investors need to buy 8 NTDOY ADRs to equal one ordinary share.) On the other hand, NTDOF ADR represents one regular share of Nintendo traded in Japan.
Generally, there’s no particular upside or downside to investing in either – the difference is whether you’d prefer to own a partial or whole share of Nintendo. (Note that Nintendo’s ADRs are set to split on 1 October to reflect the overseas split.)
Other recent stock splits
Nintendo isn’t the only stock to split in the last year, or even the past few months. Apple, Amazon, Alphabet, GameStop and Tesla have all split in recent investor memory. Most shaved hundreds – or even thousands – off a single share’s price in the process.
Apple’s stock split
Apple executed a 4-for-1 stock split in 2020, bringing per-share prices down from around $500 to a more affordable $125 a share. Since then, Apple’s shares have hovered fairly comfortably within $25 of $150 per share.
Amazon’s stock split
Amazon split its stock 20-for-1 back in early June 2022, its fourth ever. The split brought Amazon’s shares under $1,000 apiece for the first time since 2017.
Kellogg’s
K
stock split
Kellogg’s stock split worked a little differently. It wasn’t so much that the stock was splitting as that the company took a split. The 116-year-old cereal brand announced in June 2022 that it plans to divide into three separate ventures. As CEO Stele Cahillane described it, “Frosted Flakes [won’t] have to compete with Pringles for resources.”
As it turns out, a divided company means divided stock in Kellogg’s case. The shakeup is designed to result in “tax-free distributions” of shares in both new businesses to current investors.
Alphabet’s stock split
Google parent Alphabet made a splash when it completed its own 20-for-1 stock split in July 2022. The move marked Google’s second share split since its 2004 IPO. The split dragged Google’s per-share price from around $2,255 to $112.64 the next day.
GameStop’s stock split
GameStop executed its own 4-for-1 split in July 2022. But unlike the others on this list, the company didn’t split at the top of its game. Shares closed around $150 pre-split, with post-split shares opening closer to $38 the day of.
The move was decried by some analysts as a ploy to drum up investor interest on capitalize on the company’s meme stock status.
Tesla’s stock split
Tesla’s stock has split twice during the pandemic. The first, initiated in August 2020, divided the stock 5-for-1, with Tesla opening at $444.60 post-split.
In the months that followed, Tesla’s exuberant investor base bid up the price again, prompting Tesla to propose a 3-for-1 split again in August 2022. The proposal went through, and Tesla “reset the market price” of its high-flying common stock just weeks later. The second split dropped Tesla’s price to about $302.
NeuroBo’s stock split: reversing the trend
NeuroBo’s stock split isn’t exactly a stock split – in fact, it’s the opposite. Instead of splitting shares to make them more affordable, NeuroBo engineered a reverse stock split to bump up prices. The goal was to move its shares out of danger of being delisted from the Nasdaq.
The 1-for-30 reverse split combined 30 shares into one share 30 times the price, massively shrinking its liquidity. The move bumped shares up from around 56 cents each to nearer $17 at opening. However, investor enthusiasm and market volatility saw the stock price nearly double by close on the split date.
How Nintendo’s stock split does (and doesn’t) impact you
For Japan-based investors, Nintendo’s stock split represents an opportunity to buy into a huge, successful company at a far more affordable price.
But for U.S.-based investors who don’t have to invest in 100-share lots – and due to Nintendo trading OTC – the split is less impactful. For these investors, it’s simply another in a long line of tech stock divisions designed to ground high-flying prices.
That’s not to say that there’s no impact. U.S. investors will still be able to buy Nintendo at cheaper prices and enjoy any appreciation the gaming giant generates. Additionally, as Japan-based investors can invest more affordably, the company’s liquidity will grow, potentially boosting prices further.
Good news in the grand scheme
Whether you invest in Nintendo shares or ADRs, the Nintendo stock split provides a lower entry point for new and current investors. And though it doesn’t alter the firm’s value, investors may see the split as a vote of confidence in its future growth potential.
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