Nintendo bursts investor bubble: Pokémon Go is not a cash cow

Share prices plummeted as investors were told the app phenomenon's popularity does not mean big bucks.

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Nintendo investors have wiped 17 percent off the company's share price following clarification from the gaming giant that the popular Pokémon Go app is not going to be a massive earner.

Pokémon Go, a mobile app which creates a virtual map based on users' surroundings and makes users explore their physical location to capture virtual monsters, took the world by surprise. The free app proved so popular on release that servers buckled under the strain, users in countries where the app had not yet rolled out circumvented release dates and downloaded it anyway, and the system has experienced outages and login problems with so many enjoying the game.

The app took Nintendo investors by surprise, too. The gaming giant's share prices rapidly rocketed to $193 per share, adding $7.5 billion to the company's worth by July 11 and roughly $17.6 billion in the following weeks as pokémadness went global.

However, some of these financial spikes have now come back down to earth after investors were warned that Pokémon Go is not necessarily going to herald a tsunami of cash into the company.

In a press release on Friday (.PDF), the Kyoto, Japan-based firm warned that despite the success of the game, Pokémon Go's financial impact will be "limited" and, to investor dismay, Nintendo's annual forecast is not expected to be revised to a higher value based on "current conditions."

See also: Catch 'em all for longer: Quick tips to reduce Pokémon Go battery drain

The financial impact of the free application -- which makes some profit through in-app purchases -- may not transform Nintendo's bank balance, but how about the awaited Pokémon Go Plus accessory? According to the firm, any profit made from wristwatch, which allows users to play without staying glued to their smartphone, has already been factored into financial forecasts.

As noted by Bloomberg, stocks sank 17 percent in Tokyo on Friday, wiping out $6.4 billion in market value. This may not be the end of the decline, however, as Tokyo Exchange rules stipulate that shares cannot fall more than 18 percent per day in trading.

The main problem which may have eluded investors who ploughed their funds into Nintendo in the Pokémon gold rush is that the gaming company only owns marginal stakes in The Pokémon Company and the app's developer Niantic, and so much of the profit will be diverted to other coffers.

Macquarie Securities analyst David Gibson estimates that Nintendo's effective stake in the app may be as little as 13 percent.

Nintendo will report Q1 2016 earnings on Wednesday after market close.