Gree and DeNa stock slumps amid regulation fears

More than $2.5 billion was wiped off the value of DeNa and Gree today after fears that Japanese regulators were preparing to outlaw one of the most lucrative mechanisms in Japanese social games.

Serkantoto brings word from the Yomiuri Shimbun newspaper that Japan's national consumer affairs agency is casting a stern eye over "complete gacha", a popular component of social games in Japan. Taking its name from the Gashapon capsule toys, gacha is essentially a slot machine, with players paying a nominal fee per turn for a chance at winning an in-game item.

Gacha itself is not be outlawed, but complete gacha – in which, for example, a highly rare item can only be unlocked by first obtaining three or four other items through gacha – might just be. The agency is reportedly to request that the mechanism be removed from all Japanese social games.

The report had an immediate effect on the share price of Japanese social game companies, which made up eight of the 11 biggest losers on the Tokyo Stock Exchange today, losing a combined $3.8 billion. Gree's share price fell 23.25 per cent, with rival DeNa's down 20 per cent.

Gree and DeNa are set to report their latest financial results this week, and investors will need some good news if the slide in share prices is to be reversed. Last month both companies introduced caps which placed limits on the amount teenagers could spend on in-game items.