Between the $1000 30th anniversary editions, the swath of licensed crossover sets, and the six discrete Dwight Schrute cards, the recent years of Magic: The Gathering have felt like Hasbro has abandoned any pretense of restraint—and its own shareholders seem to agree.
In a 76-page lawsuit filed in the US District Court of Rhode Island last week (via GoLocalProv), a group of investors allege that Hasbro CEO Chris Cocks, former Wizards of the Coast president Cynthia Williams, and company executives engaged in "breaches of their fiduciary duties as directors and/or officers of Hasbro" by devaluing the Magic brand, even as shareholders raised concerns about the ramifications of overprinting cards and sets.
In 2022, the lawsuit says, Bank of America issued a report concluding that Hasbro was "overproducing Magic cards, which have propped up Hasbro’s recent results but are destroying the long-term value of the brand." Despite questioning from shareholders and analysts, however, the lawsuit alleges that the defendants "repeatedly denied such speculation," issuing "materially false and misleading" statements during shareholder calls where those concerns were raised.
As a result, the plaintiffs claim Hasbro executives "caused the Company substantial harm by causing it to repurchase its own shares at artificially inflated prices," as Hasbro spent $125 million to repurchase approximately 1.4 million shares of its own stock from April 2022 to July 2022, when share values had been "artificially inflated" by the outpouring of new Magic sets.
"In total, this caused the Company to overpay for repurchases of its own stock by approximately $55.9 million," the lawsuit says, which became clear when the company announced declining financial results in following quarters.
Throughout that time, Hasbro maintained that "new Magic sets were to be printed to meet demand from new consumer segments," which the lawsuit says was "false and misleading."
"Hasbro’s strategy with regard to printing Magic cards was not as carefully thought out as portrayed," the lawsuit says. "The Company was in fact printing a volume of Magic sets which exceeded consumer demand; the Company’s inventory allocation management was problematic, particularly as it pertained to the Company’s printing strategy for Magic sets; the Company was overloading the market with Magic sets to generate revenue and to offset shortfalls within the Company; as a result of the Company’s overprinting of Magic sets, existing Magic cards were devalued; and the Company failed to maintain internal controls."
IGN reports that the lawsuit's 76 pages also include an allegation that Hasbro executives attempted to manufacture a perception of high demand for Magic's controversial $1000 30th anniversary set. Less than an hour after the set's release in 2022, Wizards of the Coast tweeted that "sale has concluded, and the product is currently unavailable for purchase," implying that—despite its exorbitant price—it was so sought after that the company almost immediately sold through its inventory.
In reality, the lawsuit says, the tweet was the result of a plan from Hasbro management to "pause" sales of the set if it seemed like negative perception was damaging its initial sales, artificially buoying the company's share values. According to testimonies from former employees, Hasbro had only sold a portion of the printed 30th anniversary sets when it stopped sales.
Some of those unsold sets, the lawsuit says, were later discovered in a Texas landfill. But hey, maybe somebody paid $1000 on reprints just to toss them in the trash. Who can say?
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