On January 21, two Hasbro shareholders filed a lawsuit in the U.S. District Court of Rhode Island asking for a jury trial against Hasbro CEO Chris Cocks, former CEO Cynthia Williams, and other company executives. Their complaint alleges that these execs misled investors about the strength of their strategy for selling Magic: The Gathering cards.
The lawsuit claims that, in 2021-2023, Hasbro doubled the number of Magic products it released compared to previous years, a choice the claimants say flooded the market and failed to deliver promised growth. More seriously, this lawsuit claims executives lied to investors by saying that MtG wasn't being overprinted, when they allegedly knew that it was.
The lawsuit has been brought by Joseph Crocono and Ultan McGlone, who say they've been stock holders since 2020 and 2021. In their suit, they're claiming that Hasbro executives knowingly or recklessly misled investors between September 16, 2021, and October 26, 2023 - and that as a result of investors overvaluing Hasbro stock, the firm went on to lose $55.9 million buying back its own shares at inflated prices.
According to the lawsuit, executives said that new products were targeting distinct customer segments. However, the lawsuit claims what was going on behind the scenes was different. The real strategy, the suit alleges, "was not as carefully thought out as portrayed", and was "really just overloading the market with Magic sets to generate revenue and to offset shortfalls" within the firm's toy business.
The lawsuit claims the real situation at Hasbro came to light gradually across 2022 and 2023. On November 14, 2022, it says, Bank of America released a report on Hasbro, which - among other things - claimed that Hasbro was overprinting Magic cards and risked damaging the Magic brand.
The lawsuit notes that, on January 26, 2023, Hasbro announced it planned to cut 15% of its workforce in a restructure, and it claims the growth in MTG sales that Hasbro declared for that quarter was well below what the company had previously predicted. It further says that, on October 26 2023, Hasbro reported poor earnings, and that it had reduced its backlog of unsold products - but primarily not from Wizards of the Coast inventory.
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