Nintendo doesn't actually make Pokémon GO: investors freak out, shares plummet

You have probably read the stories about Nintendo’s market cap doubling in the wake of the global phenomenon that is Pokémon GO. The Nintendo Corporation enjoyed such great success it outstripped Sony’s 40 billion dollar valuation and posted the highest single-day trading record in Tokyo in a century.

But all that seems to have been based on a…ah…slight…misconception about Pokémon GO: Nintendo doesn’t actually make Pokémon GO. When its investors finally realized this fact over the weekend, they freaked out, dumping Nintendo stock this morning and shedding over $6 billion in less than a day.

Now, to anyone paying at least a little bit of attention, they would know that Nintendo doesn’t make Pokémon GO. Niantic does, a company that used to be owned by Google and is now invested in by Google, Nintendo and The Pokémon Company. Nintendo is a one-third voting partner in The Pokémon Company, which publishes Pokémon GO. Make sense? Here’s a flow chart to help you out.

Now, you can see just how far away from Pokémon GO Nintendo is. This has never been a secret and there was never any pretense to profitability from Nintendo. But somehow Nintendo’s investors failed to research just how directly the company would benefit from the popularity of Pokémon GO and invested like madmen.

That, as you know, added over $20 billion to Nintendo’s market cap in the last couple of weeks. But Nintendo evidently felt like things needed to be spelt out even more obviously, and put out a statement clearing things up on Friday (after close of business). You can read that in PDF here.

Perhaps not too surprisingly, when the Japanese market opened this morning, those very same investors dumped Nintendo stock like (suddenly well-informed) madmen, shedding over $6 billion dollars and 17% from Nintendo’s market cap.

It’s worth noting that the Tokyo stock exchange has rules that prevent any stock from dropping more than 18% in a day. The same kind of hot potato knee-jerk reaction is expected to continue in Europe and the U.S. throughout the day.

Of course, Pokémon is still Nintendo intellectual property, and as such is infinitely entangled in the popular imagination. So Pokémon GO’s success is still the Nintendo brand’s success. That association alone will draw a lot more attention to Nintendo’s next two upcoming games, Animal Crossing and Fire Emblem.

The immense popularity of Pokémon GO might also convince Nintendo to bring Mario to mobile and other hold-out IP owners to finally bring their legacy brands to mobile gaming. So while Nintendo does still stand to profit from Pokémon GO’s popularity, it won’t do so in the immediate hand-over-fist manner those investors expected. It’s actually Niantic that’s raking in that dough.

Did you know the truth of Pokémon GO ownership? What game would you like to see from Nintendo?