(Bloomberg) — A surprise stock split plan by Japanese game maker Nintendo Co. may provide only a fleeting boost to its shares as concerns about the company’s earnings outlook persist.
The Mario creator’s stock jumped as much as 4.5% in Wednesday morning trade, a day after the 10-for-1 split was announced. The company forecast full-year operating income which trailed analysts’ estimates, reflecting the impact of a global chip shortage and slowing demand for the Switch console.
Stock splits typically provide a lift to share prices — as seen in the case of Tesla Inc. and Alphabet Inc. — as the move puts the counters within the reach of retail investors. Based on Tuesday’s close, the minimum investment lot — 100 shares — for Nintendo’s stock is 5.64 million yen ($43,273), far above the Tokyo Stock Exchange’s guideline of 50,000 to 500,000 yen.
“In general, there is no rational reason to think a stock split is positive for stock prices,” said Kenichi Hirayama, chief strategist at Tokio Marine Asset Management Co. “If there is any effect, that should be only a temporary one.”
That’s borne out by the recent record of stock splits by big Japanese firms. Among companies with market capitalization of more than $50 billion that have conducted a stock split since 2015, only Keyence Corp. rallied in the aftermath.
Even so, Nintendo’s shares may enjoy a brief spell of sizable gains.
“Now that the stocks have split, investors are now able to buy it at around 560,000 yen which will be easier for them to reach,” said Tomoichiro Kubota, senior market analyst at Matsui Securities Co. He noted that the regular investment size for an individual investor would be 300,000-400,000 yen.
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