ValueAct, which first began buying the stock in April 2019, grew the position in Nintendo, known for its gaming consoles and for having turned characters like Mario and Donkey Kong into international hits, during the stock market sell-off in February and March, according to the letter sent to its investors.
Nintendo's future is bright, ValueAct wrote in its letter, adding there is potential for growth both in the software business and room for the company to transform itself into a broader entertainment company.
ValueAct has picked up about 2.6 million shares, or about a 2% stake, in Nintendo. Shares of the Japanese company rose more than 2% as trading started in Tokyo.
"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," a Nintendo spokesman said.
A spokesman for ValueAct declined to comment.
San Francisco-based ValueAct said it has had several meetings with members of Nintendo management and that it believes in the vision the company's chief executive, Shuntaro Furukawa, has shared with ValueAct and with others.
Unlike other investment firms that push for change publicly and often ask for board seats at target companies, ValueAct prefers to work with management behind the scenes.
Its partners could offer relevant guidance and experience to help Nintendo after having served on boards at Adobe and Microsoft, the firm's letter said, stopping short of asking for board representation.
U.S. activist investors are increasingly looking to target Japan's cash rich companies and this marks the third investment ValueAct has made in Japan in the last four years.
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