PIF banks Nintendo win but may have sold too soon

• PIF earned $1.2bn from Nintendo
• Switch 2 sold 3.5m units
• Share price has surged

Saudi Arabia’s Public Investment Fund (PIF) pocketed an estimated profit of 175 billion yen ($1.22 billion) trading Nintendo shares, but it may yet rue trimming its stake just months before the Switch 2 console’s record-breaking debut last week.

The PIF has invested in video game publishers and console makers worldwide, often through subsidiary Savvy Games Group, as part of its push to create a home-grown video game and esports industry.

The fund is a long-term shareholder in the likes of Electronic Arts and Grand Theft Auto maker Take-Two Interactive Software – it held about $6 billion of stock in the two companies combined as of March 31 – but has taken a different approach to investing in Nintendo, perhaps the industry’s most storied name.

An October 2022 bourse filing revealed the PIF had bought 5 percent of Nintendo, with further disclosures showing it steadily upped its stake to 8.6 percent in mid-February 2023.

At that time Nintendo’s shares were trading at 5,153 yen, while the PIF had acquired its stake at an estimated average cost of 5,262 yen per share for a total investment of about 587 billion yen, $4.1 billion at current exchange rates, to put it in the red, according to AGBI calculations based on bourse data.

Nintendo launched the Switch 2 games console on June 5 and sold 3.5 million units in the first four days, making it the company’s fastest selling console in its 42-year history of manufacturing gaming systems.

On the back of Switch 2 pre-launch hype, Nintendo’s stock price has more than doubled, hitting a record high of 12,360 yen in early May. It subsequently declined as traders booked profits but as of Thursday’s close it was still up 30 percent this year, ending at 11,795 yen.

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The PIF began selling Nintendo shares last October, bourse filings show. Based on Nintendo’s closing share price on the record date of these filings, the PIF sold at prices ranging from 7,637 to 9,337 yen, reducing its stake to 4.2 percent.

In all, the PIF raised an estimated 475 billion yen ($3.3 billion) from these sales at an average price of 8,339 yen per share. This would yield a profit of 175 billion yen, or $1.22 billion at current exchange rates, AGBI estimates.

The PIF’s remaining 4.2 percent stake is worth $4.48 billion, which together with the profit on the share sales gives it a combined paper and actual gain of about $3.7 billion.

Yet if the Saudi sovereign wealth fund had simply kept its entire stake in Nintendo this would be worth $9.2 billion today, more than double its investment of $4.1 billion and a theoretical profit of $5.1 billion.