Nintendo confirms 10-for-1 stock split to increase stock “liquidity” and investor base

2021 flat lay (1)
Image: Nintendo Life

Nintendo has taken the opportunity with its annual financial results to make some notable business moves, even if they have little to do with the games we can play or the systems we own. In addition to a planned share repurchase, the company has announced a significant change in its stock/share structure with a 10-for-1 split.

First, let’s look at what that means. On September 30th, Nintendo will “split” each stock into 10; So if you own 10 shares of the company, they become 100 shares. The bigger picture means that Nintendo will go from an authorized issuance of 400 million shares to four billion multiplied by 10.

To be clear, this doesn’t automatically improve the value of shares or individual shares — for example, if you have one share that’s worth $100, after such a split you’ll instead have ten shares, each worth $10.

Nintendo justified this step as follows:

Reduction of the minimum investment price as a result of the stock split, which increases the liquidity of the company’s shares and further expands the company’s investor base.

Interestingly, this is a move typically taken both to please current investors (some have been urging Nintendo to do so for some time) and in response to a particularly strong position. The better a company performs, the higher its share price, with the downside that this can slow and constrain trading, making it particularly difficult for smaller investors. Nintendo’s closing price on the Tokyo Stock Exchange on May 10 is 56,360 yen, which is about $433 per share. After that split on September 30, the price of one share would instead be around $43.

Investopedia highlights the following benefits and motivations for such a move:

Increasing the liquidity of a stock makes it easier for buyers and sellers to trade the stock. Liquidity allows traders and investors to buy and sell shares in the company without affecting the stock price too much. That can help companies buy back their stock at a lower cost, since their orders wouldn’t drive the share price of a more liquid stock up as much. For some companies, this can mean significant savings.

While a split should theoretically have no impact on a stock’s price, it often does result in renewed interest from investors, which can have a positive impact on the stock price. While this effect may wear off over time, stock splits by blue-chip companies are a bullish signal for investors.

It is certainly a step that is usually used by large and successful companies. For example, Walmart has had multiple stock splits over the years, and SpaceX confirmed a similar 10-for-1 split earlier this year.

Yasuo Sakuma, Chief Investment Officer of Libra Investments, suggested the reason and timing of this announcement to Bloomberg [paywall] that it will give investors a boost amid lower forecast sales and earnings for the year ahead.

The stock split plan would obviously be a boost. I’m just surprised that Nintendo announced a stock split after resisting it for so long.

An interesting move, then, and it will be interesting to see what impact it has when it’s complete on September 30th.

https://www.nintendolife.com/news/2022/05/nintendo-confirms-10-for-1-stock-split-to-boost-share-liquidity-and-investor-base Nintendo confirms 10-for-1 stock split to increase stock “liquidity” and investor base

Fry Electronics Team

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