Why the Nintendo Share Price Should be Affordable for Japanese Individuals

The Tokyo Stock Exchange [TSE] classifies listed stocks into TOPIX categories that rank TSE first section stocks according to market capitalization and liquidity. The TOPIX Core 30 includes the 30 most liquid and highly capitalized shares. The TOPIX Large 70 includes the next 70 most liquid and highly capitalized shares. The TOPIX 100 includes all stocks in the Core 30 and Large 70 categories.

On February 28, 2007 Nintendo (NTDOY.PK) was ranked #16 on the TOPIX 30. With 127.9 million shares outstanding and a market price on that date of 31,400 yen, the total market value (market capitalization) of Nintendo was 4 trillion yen or $33.5 billion.

The minimum number of shares of Nintendo that can be purchased on the TSE is 100. Accordingly, at the end of February 2007 a purchaser would have had to pay 3.14 million yen or $26,167 to become a Nintendo shareholder. Only 4 other companies in the TOPIX 100 have a higher entry price to become a shareholder. How many individuals in Japan can afford to place such a stock order?

The entry price to become a shareholder in Nintendo is clearly too high in Japan. It simply does not sync with Nintendo’s recent public statement that it wants to widen its shareholder base and encourage shareholding by individual investors. Nintendo has stated that it has experienced a growing interest by individuals in owning Nintendo stock, which it attributes to the growing popularity of its DS handheld player and Wii console. Given these expressions of individual interest in owning Nintendo stock, it is time for Nintendo management to take positive action to promote such ownership.

The simplest and most meaningful way for Nintendo to achieve its stated objective of encouraging individual ownership is to lower the minimum number of shares of Nintendo that can be purchased on the Tokyo Stock Exchange to one (1) from the current 100 share minimum. There are currently 8 companies in the TOPIX 30 and 14 companies in the TOPIX 100 who already allow the purchase of a single share of their stock. Interestingly, this action would allow individuals to purchase a share of Nintendo stock at essentially the same price as a Wii console.

Going forward, the share price of Nintendo should rise dramatically during the next few years as production and sales of Wii consoles, DS handhelds, and related games expand. It will, therefore, become necessary for Nintendo to keep the entry price of ownership within the reach of the average individual by declaring either stock splits or stock dividends.

It would be a good idea for Nintendo to always keep the minimum price of stockownership close to the selling price of its Wii console. Millions of Nintendo fans could then enjoy their games, while participating in the profits they generate for the company. Such profits could then allow them to buy more games, thereby, further adding to Nintendo’s financial success.

NTDOY 1-yr chart

Comments

[Steven Towns:]

I sympathize with you regarding the 100 share minimums not uncommon in Japan. However, it is still possible to buy Nintendo's ordinaries without $25k plus. They have a "mini kabu" purchase system, as do many Japanese stocks. That said, I believe Nintendo will implement a stock split later this year. I also expect an officially sponsored ADR listing as well. Regarding other Core 30 TOPIX components and Japanese stocks in general, the lack of a minimum purchase lot does not mean the purchase price is necessarily cheap. Over the long term I believe this system will disappear and resemble trading in the U.S.

2007 Mar 19 06:32 AM