Nintendo Stock Split: The Real Reason It Matters

Video game specialist nintendo (NTDOY 1.27%) (OTC:NTDOF) just announced a stock split. In most cases, I would tell you that the split won’t make much of a difference to investors.

However, this one is different. Nintendo’s stock split will make its stock much more accessible to people who buy the original stock on the Tokyo Stock Exchange.

What’s new?

On Tuesday, Nintendo’s board implemented a 10-to-1 stock split. The move will take place on the weekend of October 1, 2022. It’s the first split in Nintendo’s history. .

Investors have been asking Nintendo to do a stock split for many years, and the company has been open to the idea since 2019. The official reason for the split is to “reduce the minimum investment price”, which will increase the liquidity of Nintendo shares. and develop its investor base.

Stock splits aren’t a big deal here

For US-based investors, stock splits don’t really matter. Your broker will be happy to sell you a single share of Amazon for around $2,100 today. If you only have $200 to invest this month, almost all US brokers also offer fractional shares.

Today, one-twentieth of an Amazon share will cost you around $105. Assuming stock prices don’t move much before the company’s 20-for-1 stock split takes effect in early June, you’ll end up with a stock of Amazon whether you buy a stock after the split or one-twentieth of a share. right now.

For Japanese stocks, they can be crucial

Things are different in Japan. On the Tokyo Stock Exchange, you always have to buy shares in lots of 100 shares each, and fractional shares are nowhere to be found. The standard lot size was lowered from 1,000 shares to 100 just three years ago, so things are moving towards more relaxed requirements.

A Nintendo share was worth 57,250 Japanese yen at market close on Thursday, which works out to about $445 per share. Multiply that by 100 and you get a minimum investment of nearly 6 million yen, or $44,500. This is a stretch for many retail investors.

A minimum investment in Nintendo will drop to around $4,450 after the split. That’s a much more reasonable starting level, and Nintendo should see more interest from retail investors in October.

Wait, how’s it going for US shareholders?

American investors are sheltered from the eccentricities of the Tokyo Stock Exchange.

There are two different American Depositary Receipts (ADRs) available in the over-the-counter market. The NTDOF ticker represents a single stock of the underlying Tokyo-based stock. The NTDOY receipt translates to eight shares of Nintendo’s original stock.

On US trading platforms, lots of 100 shares are not mandatory. You can buy a single share in the company today from ticker NTDOY for just $55, and many brokers also offer fractional shares of Nintendo’s ADR. There’s no lower limit for your Nintendo investment here, practically speaking. And when the split takes effect, bringing the two ADRs down to around $45 and $5.50 per stub, the actual limit shrinks even further.

This pizza will be equally delicious in four, eight or 16 slices. Image source: Getty Images.

But the stock split on the Japanese side of the equation should also affect US investors.

First, the broader investor base and smoother liquidity should translate into higher stock prices, at least temporarily. Additionally, giving retail investors greater access to Nintendo’s stock should make the company more transparent. The company is known for keeping its charts close to the waistline, sharing only the bare minimum of required operating data and making every product announcement a surprise.

Nintendo’s stock split is bigger than Amazon’s or You’re here‘s. It’s a huge move for Japanese investors, and even US shareholders should see real benefits from the move.

About Jason Zeitler

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