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Activist Investor Builds $1.1 Billion Stake in a Resurging Nintendo

By Donna Fuscaldo - Apr 22, 2020 at 12:10PM

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ValueAct has been amassing a stake since late February, betting Nintendo has the opportunity to morph into a broader entertainment company.

Nintendo (NTDOY 0.00%) has piqued the interest of activist investor ValueAct Capital, which has amassed a $1.1 billion stake in the game maker. 

In a letter obtained by Reuters, ValueAct Capital said it has acquired 2.6 million shares of the Japanese tech stock, reflecting a slightly more than 2% stake based on Nintendo's closing stock price Tuesday. The activist investment firm began acquiring shares of Nintendo in late February and March amid a steep sell-off in the stock market due to the COVID-19 pandemic. 

A person holding a red game controller, sitting down against a yellow background.

IMAGE SOURCE: GETTY IMAGES.

ValueAct said it has held several talks with Nintendo's management over its long term strategy and believes in the company's vision laid out by CEO Shuntaro Furukawa. ValueAct believes the future is bright for Nintendo, with growth likely in its software business and the opportunity to morph into a bigger, broad-based entertainment company. 

"We believe Nintendo will be one of the largest digital media services in the world, in a category with the likes of Netflix, Disney+, Tencent Interactive Entertainment, and Apple Music," the investment firm wrote.  While Nintendo hasn't prospered like some of its rival gaming software companies, its digital transition could pay off, driving the growth of its software business, ValueAct argues. 

ValueAct tends to work behind the scenes with management rather than pushing for change publicly. In the letter, ValueAct highlighted the fact partners at the firm have served on the boards of Adobe (ADBE 2.48%) and Microsoft (MSFT 1.70%) and are in a unique position to give Nintendo advice and guidance. The firm did not ask for seats on the board, notes Reuters

Nintendo told Reuters it's aware of ValueAct's stake in the company and confirmed it has been engaged in dialogue with the firm. It would not disclose the nature of the talks.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Donna Fuscaldo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft. The Motley Fool recommends Adobe Systems and Nintendo and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nintendo Co., Ltd. Stock Quote
Nintendo Co., Ltd.
NTDOY
$53.94 (0.00%) $0.00
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$291.91 (1.70%) $4.89
Adobe Inc. Stock Quote
Adobe Inc.
ADBE
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