Börse Express – Nintendo: The real reason why the stock split matters

Important points

  • Nintendo executes a 10-for-1 stock split on the Tokyo Stock Exchange.
  • This makes Nintendo’s shares affordable for thousands of investors.
  • U.S. shareholders should also benefit from this split.

The video game specialist Nintendo (NASDAQ: RNP 0.04%) has just announced a stock split. In most cases, I will tell you that the split does not make much difference to investors.

In this case, however, it is different. Nintendo’s stock split makes its shares much more accessible to those who buy the original shares on the Tokyo Stock Exchange.

What is new?

Last Tuesday, Nintendo’s board approved a 1:10 share split. The split will take place over the weekend of October 1, 2022. This is the first stock split in Nintendo’s history.

Investors have been urging Nintendo to make a share split for many years and the company has been open to the idea since 2019. The official reason for the share split is to “lower the minimum investment amount”, which will increase liquidity in Nintendo shares and expand the investor base.

Stock splits are not a big deal in this country

For investors in the United States, stock splits do not mean much. Your broker will be happy to sell you one today Amazonshares for about $ 2,100. If you only want to invest $ 200 this month, almost all US brokers also offer you fractional shares.

One twentieth of an Amazon stock will cost you around $ 105 today. If stock prices do not move much before the company’s 1:20 stock split in early June, you end up owning one Amazon stock, whether you buy a post-split stock or a 20th part of a stock now.

They can be crucial for Japanese stocks

Things are different in Japan. On the Tokyo Stock Exchange, you still have to buy shares in 100-piece tranches, and fraction shares are not found there. The standard amount was lowered from 1,000 to 100 shares just three years ago, so the requirements are becoming more and more relaxed.

A Nintendo stock was worth 57,250 Japanese yen at the close last Thursday, equivalent to about $ 445 per share. shares. Multiply that by 100 and you get a minimum investment of almost 6 million yen, or $ 44,500. It’s too much for many small investors.

A minimum investment in Nintendo will drop to around $ 4,450 after the split. It’s a much more reasonable entry level, and Nintendo is likely to attract more interest from retail investors in October.

But what does that mean for U.S. shareholders?

US investors are shielded from the eccentricities of the Tokyo Stock Exchange.

There are two different types of US Depositary Receipts (ADRs) available in the over-the-counter market. The ticker NTDOF represents a single share of the underlying stock in Tokyo. NTDOY is equivalent to eight shares in the original Nintendo share.

Lots of 100 are not a requirement on US trading platforms. You can buy a single share of the company with the ticker NTDOY for as little as $ 55 today, and many brokers also offer fractions of Nintendo’s ADR. There is virtually no lower limit on your investment in Nintendo. And when the split takes effect and the two ADRs fall to around $ 45 and $ 5.50 per share, the real limit will shrink even more.

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

First, the broader investor base and free-flowing liquidity should be translated into higher stock prices – at least temporarily. The company will also become more transparent if retail investors have more access to Nintendo’s shares. The company is known for not showing its cards, only revealing a minimum of business data and treating each product announcement as a surprise.

Nintendo’s stock split is more important than Amazon’s or Tesla. It’s a big step for Japanese investors, and US shareholders should also benefit from the move.

The article Nintendo: The Real Reason the Stock Split Matters first appeared on The Motley Fool Germany.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fools’ board of directors. This article is written by Anders Bylund and was published on Fool.com on 13/5/2022. It has been translated so that our German readers can participate in the discussion.

The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends Nintendo.

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