Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Nintendo’s share price fell ~1/3 in six months due to rising memory costs pressuring Switch 2 hardware margins.</li>
<li>Hardware sets installed-base size, but software drives most profits; lifetime tie ratio likely remains ~10 games per console.</li>
<li>Durable franchises like Mario/Zelda provide long-term resilience; next cycle may not be far more profitable than the last, but hardware headwinds are already priced in.</li>
</ul>


Nintendo’s share price fell ~1/3 in six months due to rising memory costs pressuring Switch 2 hardware margins.
Hardware sets installed-base size, but software drives most profits; lifetime tie ratio likely remains ~10 games per console.
Durable franchises like Mario/Zelda provide long-term resilience; next cycle may not be far more profitable than the last, but hardware headwinds are already priced in.


Nintendo: Hardware Headwinds, Software Lifeline

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>Since the announcement of the US$1.5 billion secondary offering, <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo (7974 JP)</a>’s shares have declined 3.5% to the undisturbed price of JPY8,995 per share (26 February).</li>
<li>It is instructive to look at recent large Japanese placements to understand the potential trading pattern. Nintendo's share decline is lower than the median of recent large placements.</li>
<li>The offering will likely be priced on 9 March. The average large Japanese placement tends to generate positive returns.</li>
</ul>


Since the announcement of the US$1.5 billion secondary offering, Nintendo (7974 JP)’s shares have declined 3.5% to the undisturbed price of JPY8,995 per share (26 February).
It is instructive to look at recent large Japanese placements to understand the potential trading pattern. Nintendo's share decline is lower than the median of recent large placements.
The offering will likely be priced on 9 March. The average large Japanese placement tends to generate positive returns.


APAC IPOs & Placements, Aequitas Research

Nicholas Tan

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>A group of shareholders are looking to raise up to US$1.25bn, post the buyback completion in <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo (7974 JP)</a> .</li>
<li>Post the buyback, the deal represents 2.7 days of ADV and 1.7% of shares outstanding.</li>
<li>We looked at the deal background in our previous note. In this note, we talk about the updates and compare it to other past large deals.</li>
</ul>


A group of shareholders are looking to raise up to US$1.25bn, post the buyback completion in Nintendo (7974 JP) .
Post the buyback, the deal represents 2.7 days of ADV and 1.7% of shares outstanding.
We looked at the deal background in our previous note. In this note, we talk about the updates and compare it to other past large deals.


Aequitas: Nintendo Placement - Buy Back Done, No Relative Correction. Relatively Small Vs Past Deals

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>Four shareholders are looking to sell upto 37.6m shares (JPY 338bn; US$2.17bn) of <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo (7974 JP)</a> in a secondary offering at a 3-5% discount to the close on pricing date.</li>
<li>To reduce the impact of the offering and improve capital efficiency, <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo (7974 JP)</a> will buy back up to 14m shares via ToSTNeT-3 paying a maximum of JPY 100bn.</li>
<li>The increase in the free float will be offset by a decrease in the number of outstanding shares, and the passive flows will be relatively small.</li>
</ul>


Four shareholders are looking to sell upto 37.6m shares (JPY 338bn; US$2.17bn) of Nintendo (7974 JP) in a secondary offering at a 3-5% discount to the close on pricing date.
To reduce the impact of the offering and improve capital efficiency, Nintendo (7974 JP) will buy back up to 14m shares via ToSTNeT-3 paying a maximum of JPY 100bn.
The increase in the free float will be offset by a decrease in the number of outstanding shares, and the passive flows will be relatively small.


Nintendo (7974 JP) Secondary Offering: Buyback Absorbs Some Selling; Passive Impact Limited

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Friday 27 February after the close, three banks and <a href="https://www.smartkarma.com/entities/dena-co-ltd" target="_blank" data-smartkarma-citation="entities:747:1" rel="noopener">DeNA (2432 JP)</a> announced a sale of <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo (7974 JP)</a> shares worth ¥300bn+ measured at a 5% discount to the close.</li>
<li>This will price likely on 9 March, with half the deal going to instos. There will be a ToSTNeT-3 buyback of up to ¥100bn on either 3-4 March. </li>
<li>I expect this one gets taken easily. Possibly even squeeze-able. The next week or two may be busy before unwinds taper off. </li>
</ul>


Friday 27 February after the close, three banks and DeNA (2432 JP) announced a sale of Nintendo (7974 JP) shares worth ¥300bn+ measured at a 5% discount to the close.
This will price likely on 9 March, with half the deal going to instos. There will be a ToSTNeT-3 buyback of up to ¥100bn on either 3-4 March. 
I expect this one gets taken easily. Possibly even squeeze-able. The next week or two may be busy before unwinds taper off. 


[Japan ECM] Three Banks & DeNA (2432) To Offer ¥300bn of Shares, Maybe Dropping to ¥200bn

Japan

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

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Nintendo (7974 JP)

Nintendo: Hardware Headwinds, Software Lifeline

Nintendo's share price dropped due to rising memory costs affecting hardware margins, but long-term resilience intact. Hardware challenges are...

Mark Chadwick

Nintendo (7974 JP): The Current Playbook

The offering, which was reduced due to the ToSTNeT-3 repurchase, will likely be priced on 9 March. The average large Japanese placement tends to...

Arun George

Aequitas: Nintendo Placement - Buy Back Done, No Relative Correction. Relatively Small Vs Past Deals

A group of shareholders are looking to raise up to US$1.25bn, post the buyback completion, in Nintendo. In this note, we talk about the updates and...

Nicholas Tan

Nintendo (7974 JP) Secondary Offering: Buyback Absorbs Some Selling; Passive Impact Limited

Four shareholders are looking to raise up to US$2.17bn by selling some of their Nintendo shares. There could be more behind. Nintendo will buy back...

Brian Freitas

[Japan ECM] Three Banks & DeNA (2432) To Offer ¥300bn of Shares, Maybe Dropping to ¥200bn

Nintendo Friday announced a ¥300bn offering. Three banks and DeNA will sell shares. Cross-holders don't own that much, but these crossholders do....

Travis Lundy

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52-week Range

Market Cap (USDm)

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Nintendo: Hardware Headwinds, Software Lifeline

​Nintendo's share price dropped due to rising memory costs affecting hardware margins, but long-term resilience intact. Hardware challenges are...

Mark Chadwick

Nintendo (7974 JP): The Current Playbook

The offering, which was reduced due to the ToSTNeT-3 repurchase, will likely be priced on 9 March. The average large Japanese placement tends to...

Arun George

Aequitas: Nintendo Placement - Buy Back Done, No Relative Correction. Relatively Small Vs Past Deals

A group of shareholders are looking to raise up to US$1.25bn, post the buyback completion, in Nintendo. In this note, we talk about the updates and...

Nicholas Tan

Nintendo (7974 JP) Secondary Offering: Buyback Absorbs Some Selling; Passive Impact Limited

Four shareholders are looking to raise up to US$2.17bn by selling some of their Nintendo shares. There could be more behind. Nintendo will buy back...

Brian Freitas

[Japan ECM] Three Banks & DeNA (2432) To Offer ¥300bn of Shares, Maybe Dropping to ¥200bn

Nintendo Friday announced a ¥300bn offering. Three banks and DeNA will sell shares. Cross-holders don't own that much, but these crossholders do....

Travis Lundy

Nintendo's share price dropped due to rising memory costs affecting hardware margins, but long-term resilience intact. Hardware challenges are...