ValueAct Capital Partners LP has recently built a stake of about 2.6 million shares, or about 2%, in Nintendo, worth around $1.1 billion.
The San Francisco-based company began buying stock in April 2019 but grew its position in February and March this year, according to a letter sent to its investors and seen by Reuters.
ValueAct is described as an “activist investor” – a shareholder that uses an equity stake to acquire influence over a corporation’s management.
Nintendo’s future is bright, ValueAct reportedly wrote in its letter, adding that there was potential for the company to transform itself into a broader entertainment company.
While its core business remains making and selling games, Nintendo has increasingly moved to leverage its popular IP in various ways in recent years.
The company’s new Nintendo Tokyo store opened in November 2019, Super Nintendo World theme parks are set to open at Universal Studios locations around the world and a new Super Mario animated movie is expected to be released “around 2022”.
ValueAct said in its letter to investors that although Nintendo has not prospered as much as video game companies like EA and Activision, the company was now going through a digital transition that was sure to pay off.
“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 letter said.
ValueAct said it had several meetings with members of Nintendo management and that it believes in the vision of the company’s chief executive, Shuntaro Furukawa.
Its partners could offer relevant guidance and experience to help Nintendo having previously served on boards at Adobe and Microsoft, the firm’s letter said.
Japanese companies have historically been wary of brash US investors, but ValueAct claimed its experience at Nintendo has been different.
Management has been “welcoming to those who take the time to understand the unique Nintendo way,” it said in its letter.
A Nintendo spokesperson told Reuters: “We are aware that ValueAct is holding a stake and we’ve been engaged in dialogue with them. We don’t disclose content of our dialogue with our investors.”