D&D General Hasbro activist begins proxy fight, urges Dungeons & Dragons spinoff

beancounter

(I/Me/Mine)
It's always best to have a diversified portfolio, whether you're an individual investing in stocks, or a company holding a variety products or brand names.

The basic idea is that if one part of your portfolio does poorly, you still have others that will keep your ROI from tanking.
 

log in or register to remove this ad

Divine1943

Explorer
This article was posted on the front page of the Wall Street Journal today. Below is a snippet. Could be a v. v. big deal. The implications of this is that if WoTC is spun off another company could buy it. And the only ones really with that kind of market cap are your really big ones. Worth watching this closely.


A little-known activist investor is seeking to add several directors to Hasbro Inc.’s board and is urging the toy maker to make changes including a spinoff of its fast-growing unit housing games such as Dungeons & Dragons.

Alta Fox Capital Management LLC, which has a 2.5% stake in Hasbro worth roughly $325 million, has nominated five directors to its board, according to a letter viewed by The Wall Street Journal that will be sent to the company’s shareholders. Shareholders will vote on director nominees at Hasbro’s annual meeting this spring.

Alta Fox, which says in the letter that it has spoken to Hasbro, noted that the company’s stock price is lower than it was five years ago and has significantly trailed the broader market. Alta Fox believes Hasbro could double its valuation by spinning off the unit that houses the Dungeons & Dragons business.

Hasbro said in a statement it will review Alta Fox’s nominees. It said it is excited to welcome its new chief executive officer, Chris Cocks, who previously led the unit housing Dungeons & Dragons, known as Wizards of the Coast and Digital Gaming.
 

Divine1943

Explorer
It is worth quoting two more sections:
“Alta Fox estimates in the letter that if the division was separated, it could be worth roughly as much as Hasbro, or $13 billion or more.”

That’s a lot of freaking money.

“The activist takes issue with Hasbro’s capital allocation, including its acquisition of Entertainment One in 2019, and its Brand Blueprint strategy, which focuses on promotion through multimedia storytelling.
 


The activist’s theory (and this is a common one) that the sum of the parts is worth less than two stand alone companies. That WoTC’s valuation is dragged down by the lower numbers for the rest of Hasbro and that without WoTC the rest of Hasbro would be forced to do better.

The Board (and management) owns relatively little stock, Hasbro is broadly owned by the public.

The WSJ article was weird in that it mentioned D&D over and over and only one mention of Magic the Gathering which is a much more popular game.

Hasbro invested quite a lot of their cash flow into media assets the past decade and not as much in growing their core games and toys business. They have generally fumbled digital gaming.

Years ago I bought enough stock so that the dividend would pay for about what I was spending on Magic then. I switched to D&D about 5 years ago (switched back is more accurate) and the stock has more than doubled since I bought it, but it has been very stagnant the past while.

Decent cash flow generation and stock price underperformance often draws activists.
 






Parmandur

Book-Friend

Activists explaining their case.
Um, wow, being angry Magic players seems to be at the core of this, under the "Players" option from the hamburger menu:

"Alta Fox’s commitment to our investment in Hasbro is unique in more ways than one: we are also players of Magic: The Gathering (“MTG”), have participated in recent Arena opens and are acutely aware of customers’ collective frustrations with Wizards under Hasbro’s current model."

And they cite a video from "The Professor" as evidence of Hasbro issues!

This is some high level needed.

I really like the Brand strategy, so I hope this effort crashes and burns. And I don't rust the slick presentation, neither.
 

Umbran

Mod Squad
Staff member

Activists explaining their case.

The idea that whoever they are nominating for the board is "independent" is pretty laughable, I'm sorry to say.

Using performance for the last 12 months is also highly questionable. The covid epidemic has been a special period, and while it would be great if WotC were to perform similarly in the future, anyone making major long-term financial decisions based on such an assumption is taking a heck of a risk.

A sale of WoTC on its own could generate $13 billion. That’s why they are being urged to sell. That’s a lot of money.

They aren't being urged to sell. They are urged to spin it off into a new company, the stock of which would be held by current Hasbro shareholders.
 

UngainlyTitan

Legend
Supporter
Um, wow, being angry Magic players seems to be at the core of this, under the "Players" option from the hamburger menu:

"Alta Fox’s commitment to our investment in Hasbro is unique in more ways than one: we are also players of Magic: The Gathering (“MTG”), have participated in recent Arena opens and are acutely aware of customers’ collective frustrations with Wizards under Hasbro’s current model."

And they cite a video from "The Professor" as evidence of Hasbro issues!

This is some high level needed.

I really like the Brand strategy, so I hope this effort crashes and burns. And I don't rust the slick presentation, neither.
I also like the brand strategy and believe that this group are looking for a quick buck but I have no horse in the race other than a customer and as a customer I feel no obligation to take sides in a stockholders bunfight.
 


Jer

Legend
Supporter
Would this be good for gamers, since Wizards would be free to focus on D&D and Magic, or is there something I'm missing?
I suspect this would NOT be good for gamers. Mostly because when the shareholders decide that they know how to run a company better than the folks running it and they're going to dictate strategy to them ... it historically doesn't go well in the long term. Usually the shareholders make a lot of money but leave the rotting corpse of a company behind.

Whether that corpse in this case would be Hasbro or Wizards is a coinflip.

In my cynicism I suspect that a spin-off would end up with either Wizards eventually re-acquiring Hasbro or with Wizards crashing and burning due to mismangement.
 

Divine1943

Explorer
I suspect this would NOT be good for gamers. Mostly because when the shareholders decide that they know how to run a company better than the folks running it and they're going to dictate strategy to them ... it historically doesn't go well in the long term. Usually the shareholders make a lot of money but leave the rotting corpse of a company behind.

Whether that corpse in this case would be Hasbro or Wizards is a coinflip.

In my cynicism I suspect that a spin-off would end up with either Wizards eventually re-acquiring Hasbro or with Wizards crashing and burning due to mismangement.
I mean, the idea that shareholders aren’t calling the shots for WoTC now is a bit misguided. D&D and Mtg are completely corporate now. That’s pretty undeniable.
 

Frozen_Heart

Adventurer
I suspect this would NOT be good for gamers. Mostly because when the shareholders decide that they know how to run a company better than the folks running it and they're going to dictate strategy to them ... it historically doesn't go well in the long term. Usually the shareholders make a lot of money but leave the rotting corpse of a company behind.

Whether that corpse in this case would be Hasbro or Wizards is a coinflip.

In my cynicism I suspect that a spin-off would end up with either Wizards eventually re-acquiring Hasbro or with Wizards crashing and burning due to mismangement.
What would the short and long term effect of WotC collapsing be for the tabletop RPG industry? DnD 5e is so overwhelmingly popular compared to any of its competitors that I can't picture anything being able to fill that void very fast, if at all.
 


Bill Zebub

“It’s probably Matt Mercer’s fault.”
Why would Hasbro spin off a cash cow?

Because you can load up on debt (including due to the payouts to the financial engineers involved) and then leave all the debt in the old company, with all the assets in the spin-off, then let the old company die while the new company soars in valuation.
 

Umbran

Mod Squad
Staff member
I mean, the idea that shareholders aren’t calling the shots for WoTC now is a bit misguided. D&D and Mtg are completely corporate now. That’s pretty undeniable.

So, there's a huuuge difference between "being corporate" and "shareholders calling the shots."

Shareholders are generally pretty quiet about corporate strategy. Typically, the shots are called by the executive board, not directly by the shareholders.
 

Dungeon Delver's Guide

An Advertisement

Advertisement4

Top