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Short sellers flock to Nintendo as Pokemon aura fades

People play the augmented reality mobile game "Pokemon Go" by Nintendo on their mobile phone during a "poketour" organized by the municipality in San Salvador, El Salvador July 23, 2016. REUTERS/Jose Cabezas

SAN FRANCISCO (Reuters) - Bets that shares of videogame maker Nintendo will fall have quadrupled in the past week following a major rally sparked by the wild popularity of its Pokemon GO smartphone game.

Short interest in Nintendo stood at $1.2 billion on Monday and was climbing ahead of the company’s first-quarter report on Wednesday, according to financial analytics firm S3.

Bets by short sellers against Nintendo had remained low in mid-July while the company’s stock surged more than 100 percent over seven sessions.

The new interest from short sellers coincides with a sell-off that began last week and gained steam on Monday with an 18 percent slump, the biggest one-day drop in Nintendo shares since 1990.

On Friday, the Kyoto-based gaming company said income from the game would be limited and that it did not plan to revise its earnings outlook.

Nintendo’s stock more than doubled in mid-July as the augmented reality smartphone game captivated fans around the world, with 21 million active U.S. users in under two weeks of its launch.

Daily usage of the Pokemon smartphone app in the United States peaked on July 14, according to a report last week by SurveyMonkey.

Nintendo owns a 32 percent stake in affiliate Pokemon Company, which owns the licensing rights to the game.

Even with Monday’s decline, Nintendo’s shares are still up some 60 percent compared with levels before the game’s July 6 launch in the United States, Australia and New Zealand, adding nearly $12 billion in market value.

Reporting by Noel Randewich; Editing by Jonathan Oatis

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