Nintendo is Splitting its Stock so you can Finally Afford to Invest in it
On October 1st, Nintendo will do a 10-for-1 stock split.
Nintendo recently announced that the company will be splitting its stocks. This is interesting news as it could increase the liquidity in the stock by attracting more retail investors.
In Japan, you can only buy stocks in sets of 100, also called a unit. With the current market price of ¥61,430, that means you need to shell out ¥6,143,000 ($42,363) just to start investing in Nintendo…
However, on October 1st this year, Nintendo is doing a 10-for-1 stock split. Hence, with today’s stock price, one stock will be worth ¥6,143, and buying one unit (100 stocks) will cost you ¥614,300 ($4,239).
Not cheap, but definitely more reasonable. Also, be aware that some stock-brokers in Japan, like SBI or Rakuten, offers fractional trading so you can buy as little as one stock (read more about it here). However, buying stocks this way come with many additional costs.
What is a stock split?
A stock split happens when companies increase the overall number of shares that are available in a company. This makes it more affordable for investors to buy shares. For example, many investors find buying 15 shares at $150 easier on their wallet than purchasing one share at $1,500.
Why would it be in a company’s best interest to split its stock? Increasing the number of shares boosts a stock’s liquidity, making it easier to trade.
A stock split doesn’t change the value of a company, nor does it affect the value of anyone’s investments. While the number of shares that an investor has will change, the value of the shares does not.
Is it wise to invest in Nintendo now?
A couple of weeks ago, I wrote an stock analysis on Nintendo that you can read here:
In my article, I argue that Nintendo is extremly reliant on its game-consoles sales which seem to be reaching a plateu short-term. However, I also highlight the company's incredible balance sheet and longer-term growth potential.
In light of the stock-split news, some investors are calling the timing unusual and are trying to explore the possible motivation behind the move. Reports highlight the fact that Switch sales are down and many of the company’s products are affected by global supply-chain issues.
But in truth, it’s impossible to know whether buying Nintendo is a good or bad decision. Like any other stock purchase, time will determine whether it’s a good buy.
The only thing that can be said for sure is that it is foolish to buy, or not buy, the Nintendo stock simply based on the news of the stock split alone.