Nintendo (NTDOY) 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.


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 0.26%) and Microsoft (MSFT -0.25%) 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.