There is this story how Microsoft wanted/wants to buy Nintendo but was laughed out of the room. Is nintendo not a stock company? Couldnt Microsoft just buy 51% of all the shares? From what Ive seen the biggest shareholder is a japanese bank with 17%. Its not like somebody already owns the half.
In: 1530
They could, this is called a hostile takeover. And it is possible that they have tried. The problem is that most shareholders are not willing to sell their shares. At least not at a price that Microsoft is willing to buy them for. This is why Microsoft was laughed out of the room. The ones who did laugh them out of the room are the ones who own over 50% of the shares, so they are the ones Microsoft have to buy the shares from one way or another.
They might be able to buy Nintendo piece by piece by offering to buy the shares from individual investors. Firstly on the stock exchanges where the most willing to sell are, but this is just a fraction of the total shares. Then various other funds and more “rational” shareholders. The bank you mentioned might actually be willing to sell their 17% for maybe 10-20% over the current market price. But then it becomes harder and harder to find people willing to sell their shares. Especially as it is known that Microsoft is buying all of it and is willing to pay a lot. So people will be holding out, either because they do not want Nintendo to fall into the hands of Microsoft or because they think they can get a better price either as Microsoft increases their bid or by holding on to the shares for another decade or two.
Nintendo is a Japanese company, so their stock is over there. However…
Considering they both compete in a similar market – video games and consoles – this definitely would smell like an anti-trust, monopoly sort of behaviour. The 3 big video game console players are Microsoft (xbox), Nintendo (switch, wii, etc) and Sony (playstation). Merging 2 of them together is gonna bring down one heck of an antitrust investigation and probably just be blocked outright.
Microsoft has already been accused of monopolistic practices in the past. Last thing they want is another one.
How old is this story you speak of?
Well, in order to buy, someone has to be willing to sell. So Microsoft can indeed just start buying Nintendo stock on the stock exchange. However, this will cause the price to increase, since Microsoft would have to make the highest bid to purchase the stock. When others see this increase in price, you will likely see other investors hopping on and also buying some stock in hopes that the price goes further up. Now Microsoft again needs to increase the purchase price, again pulling in more traders, pushing the price further and further up in a vicious cycle.
And even if you outcompete everyone, perhaps you only manage to buy 38% because there just wasn’t enough stock available on the active market, the rest is maybe just sitting in the portfolios of banks and other investors who are keeping it longterm regardless of the price. So now you still failed to gain a majority and you are back to the starting square.
That’s why it’s more beneficial to make an acquisition agreement directly with the company, to avoid paying a lot of extra due to market fluctuations and to make sure you actually get the required amount of stock.
Let’s say that all kinds of securities and anti-trust laws didn’t exist. To buy 51% of the shares, you would have to find 51% of people who are willing to sell at a price that is acceptable to you. Once word gets out that Microsoft is trying to buy 51% of Nintendo, and you hear they’ve already accumulated 30%, what are you going to do? Jack the price up!
So today Nintendo is selling for $10 a share, but that’s the lowest anyone is willing to sell it for. As you buy out the lower priced sellers, you’re going to need to pay more and more a) because the stock holder already believes it worth more, and b) in the “supply-demand equation” you’re really pushing up demand, which will inflate the price.
Shareholders have to be selling before microsoft could buy. And anyone with shares in Nintendo would be a fool to sell any time soon. They could afford it probably, but they don’t have enough sellers for a hostile takeover l.
I want to add to the answers here that I once read there was a law in Japan preventing such entire company buyouts, which is one of the reasons why they’ve struggled to acquire much Japanese content. I think they’ve tried SEGA before.
So as you buy more shares, the “low hanging fruit” of people willing to sell near the original market price goes away, and you end up having to pay more per share, especially if news gets out that M$ wants to buy and therefore people think they can sell for more
Also to prevent monopolies the FTC and other regulatory bodies (UK’s CMA) would get involved, just like the Activision deal that is still being worked out almost 2 years later – Nintendo, a competing hardware manufacturer would have a lot more scrutiny and oversight before it’s allowed to go through
Hostile takeovers are extremely rare in Japan. Tender offers are rare, and the completion of a hostile buyout are even more rare–I think the last major deal happened in 2021.
Nintendo was established as a family-run/family-headed company and was run that way for the vast majority of its history, so I’d imagine its corporate bylaws are structured to poison pill hostile takeover attempts.
Even if all of the other complexities with buying a controlling stake could be overcome, there might be cultural issues at play that would make a transaction difficult – institutional Japanese investors might be very reluctant to sell control of a storied Japanese company to a foreign company.
It’s not nearly as simple as that.
E.g. you could try to buy all Facebook shares, but then you have to deal with the fact that Zuck owns stock amounting to 51% of the voting power, so it’s still his company for all practical purposes.
Even if you don’t have that sort of control by one individual, some companies have “poison pills”: bylaws where, if one shareholder crosses a certain threshold, all other shareholders get to buy a bunch of stock at a highly discounted price.
I don’t know Nintendo’s situation, but there’s many ways in which it’s not that easy to buy out a company that doesn’t want to be bought out.
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