As many of you know by now there is a new mobile phone game out that was sweeping the world. In light of all that was going on in the world Pokémon Go quickly became the fastest growing app in history and has been downloaded an estimated 75+ million times! That is more than the populations of Pennsylvania, New York and California combined!
If that number seems absurd here is why it isn’t: Pokémon is one of Nintendo’s top franchises and started its meteoric rise back in 1996 with its first game release on Game Boy. In the past 20 years Nintendo has sold over 260 video games, 21.5 billion trading cards, aired over 800 cartoon episodes and has had 17 full length movies.† So it should have been no secret that Nintendo’s mobile “augmented reality” game where you walk around catching and battling Pokémon in real life was going to be a hit.
Pokémon Go’s rapid success saw Nintendo’s stock price jump from $17.53 on July 6th a share to over $33 a share on July 15th. That is a 90.75% increase in just 8 trading days. Nintendo recently published a letter to investors stating that while it owns a 32% stake in The Pokémon Company, they didn’t publish or develop the game. This lead to nearly an 18% decrease in the company’s stock price†† on Monday the 25th. All told the game has still added nearly $12 billion to Nintendo’s market value.
Now I am sure you’re all thinking “why do I care about Pokémon? Why is my Investment Advisor sending me something about a childish game?” Believe it or not Pokémon’s overnight success is a microcosm of the how impulsive the market can be. Despite having no real impact on Nintendo’s financials, Pokémon Go effectively doubled Nintendo’s stock price. The real take away from this is in the short term, the markets can be dramatically impacted by people’s perceptions. Every now and again we might see these quick moves one way or another, but as the idiom goes “water seeks its own level”.
At minimum treat this as a public service announcement and watch out for people aimlessly trying to catch thin air while walking in traffic, or doing so while driving erratically.
† As per a Polygon report
†† According to Reuters article on 7/25/16
All the best,
Wesley R. Nicholson, Mike Allen and Aaron Everdyke