UPDATE: A fan with some insider knowledge has explained further. This treasury stock is, in fact, the shares owned by Hiroshi Yamauchi, and this is how Nintendo is going to take care of his family's inheritance in the company. This scenario has been planned out for some time now, in fact by Hiroshi Yamauchi himself since he was alive. Because inheritance taxes take as much as half of the inheritance, Yamauchi arranged for this buyback so that his family gets as much back as they can. The amount they will use to purchase also comprises between 8 to 12 % of their cash reserves, and based on future performance, they may need to buyback more shares in the future. Details are here, here and here.
Nothing about the original post is incorrect, but of course, this casts it all in a new light. It's also worth knowing that the Yamauchi family's investment in Nintendo will remain substantial after this transaction.
ORIGINAL POST BELOW:
In a press release, Nintendo has revealed that they will go ahead with acquiring of 9,500,000 of its outstanding shares, labeled treasury stock, tomorrow.
Treasury stock is a type of stock created when a company launches its IPO. Not all shares are issued to the public. Some shares are held in the company’s treasury. Alternately, treasury stock can be created when companies buy back shares from the open market. In this case, Nintendo is going for the former, purchasing shares back from its own treasury.
They will go through these transaction on the Tokyo Stock Exchange on Off-Auction Own Share Repurchase Trading, which is just a process to guarantee that only Nintendo can purchase said shares. Depending on market conditions, Nintendo may not buy all the shares, but otherwise the number will not be changed.
The amount of shares adds up to 7.43 % of the total outstanding shares and is valued at 114,237,500,000 yen.
As Iwata has mentioned before, their late leader Yamauchi prepared for emergencies by preparing a massive warchest of money, and they are making use of the warchest today. The move will have a temporary adverse effect because they had to use their money, but is better than letting things stand as they are.
As some fans posit, it is a move Nintendo has to take now that (presumably) Yamauchi’s heirs have opted to sell their shares. It is also the best option to protect the interests of their shareholders, who would have to take a larger loss on their investment otherwise.
It also protects them from the possibility of a takeover, although as Sony has itself shown, it is difficult to initiate such a takeover on the large Japanese corporations, even at this juncture.
Overall, it’s a move that protects Nintendo’s interests, and should hearten fans with the knowledge that they are far from out of the game.