The Significant Influence of Institutions on Nintendo's Share Price

The Significant Influence of Institutions on Nintendo’s Share Price

by Tom Misch
in News
on 31 May 2024

Institutional ownership in Nintendo Co., Ltd. (TSE:7974) holds a substantial stake in the company, indicating their significant influence over the company’s share price. With institutions owning 55% of the shares, they have the most to gain if the stock rises and the most to lose if there is a downturn. This level of ownership carries weight, especially with individual investors who consider it a desirable trait.

Diving deeper into the ownership structure of Nintendo, the top 13 shareholders hold 50% of the company’s shares, implying that no single shareholder has a majority. In terms of specific institutional investors, the largest shareholder is the Public Investment Fund with a 9.6% ownership stake. The second and third-largest shareholders hold approximately 7.0% and 4.6% of the shares outstanding, respectively.

While institutional ownership provides credibility among professional investors, it is important to note that institutions can make bad investments as well. When multiple institutions own a stock, there is a risk of a ‘crowded trade’, wherein multiple parties may compete to sell the stock quickly if the trade goes wrong. This risk is higher in companies without a history of growth.

In terms of insider ownership, Nintendo insiders own less than 1% of the company, with holdings worth JP¥142m. Though it is always good to see some insider ownership, it is worth investigating if insiders have been selling their shares.

The general public, comprising individual investors, holds a 34% stake in Nintendo. While this ownership size may not directly influence policy decisions, the collective impact of the general public can still shape company policies.

To gain a deeper insight into the company’s performance, it is beneficial to consider various factors. Apart from ownership structure, analyzing historical data on earnings, revenue, and cash flow can provide a holistic view. Assessing analyst sentiments and predictions about the future can also be valuable.

As always, it is important to conduct thorough research before making any investment decisions. This article provides general information based on historical data and analyst forecasts, and should not be considered as financial advice.

Additional Facts:
1. Nintendo Co., Ltd. is a Japanese multinational consumer electronics and video game company headquartered in Kyoto, Japan.
2. Nintendo is one of the most well-known and influential companies in the video game industry, having created iconic franchises such as Super Mario, The Legend of Zelda, and Pokémon.
3. The company was founded in 1889 as a playing card company and later diversified into video games and other entertainment products.
4. Nintendo’s stock is traded on the Tokyo Stock Exchange under the ticker symbol 7974.
5. The company has a market capitalization of over $80 billion as of 2021.

Key Questions:
1. How do institutional investors influence Nintendo’s share price?
The substantial ownership stake held by institutions means their buying or selling decisions can significantly impact the stock price. When institutions buy more shares, it can lead to increased demand and a positive effect on the share price. Conversely, if institutions sell off their holdings, it can put downward pressure on the stock.

2. What are the advantages of institutional ownership for Nintendo?
Institutional ownership brings credibility and stability to a company’s shareholder base. The involvement of professional investors can attract other investors and signal confidence in the company’s future performance. Moreover, institutional investors often have significant resources and expertise to analyze and support the company’s growth.

Key Challenges/Controversies:
1. Crowded Trade Risk: When multiple institutions own a stock, there is a risk of a crowded trade, where a significant number of investors try to sell the stock at the same time. This can lead to increased volatility and potentially affect the share price negatively.

2. Insider Selling: While insider ownership is generally seen as positive, if insiders start selling large amounts of shares, it can raise concerns among investors. It is essential to monitor if insiders have been consistently selling their holdings and the reasons behind it.

Advantages:
1. Credibility and Stability: Institutional ownership can provide stability and credibility to a company’s shareholder base, attracting other investors.
2. Expertise and Resources: Institutional investors often have significant resources and expertise to analyze and support a company’s growth.
3. Influence on Share Price: Institutions hold a substantial stake, giving them the potential to influence the company’s share price positively.

Disadvantages:
1. Crowded Trade Risk: When multiple institutions own a stock, there is a risk of a crowded trade, which can lead to increased volatility and potential negative effects on the share price.
2. Potential Conflicts of Interest: Institutions may have conflicting interests, and their buying or selling decisions may not always align with individual investors’ preferences.
3. Less Ownership by Insiders: A low percentage of insider ownership may raise concerns about how aligned the interests of management and shareholders are.

The source of the article is from the blog foodnext.nl