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

[Blue Orange]

WSJ News Exclusive | Hasbro Activist Begins Proxy Fight, Urges Wizards Unit Spinoff

Alta Fox Capital Management has nominated five directors to the toy company’s board, saying its stock has been trailing the broader market.

www.wsj.com

I can't imagine people here are too nuts about financial news, but this caught my eye. It's behind a paywall, so I'll try to summarize.

From what I can tell, an activist investor is trying to make Hasbro spin off Wizards, claiming it'll double its valuation (apparently Wizards is making so much money off D&D and M:tG the company would do better on its own).

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?

 

[Baron Opal II]

Why would Hasbro spin off a cash cow?

 

[Irlo]

Why would Hasbro spin off a cash cow?

Because the stockholders who own the company would gain shares of WotC and make money? Profits would be siphoned off into stockholder dividends rather than folded into the larger company's margins.

 

[Malmuria]

The question would be whether Hasbro is stable enough to spin off wotc and hold its own valuation. I would guess yes? They still own monopoly and lots of other games and IP that seem pretty solid.

IMO, investors taking note of d&d will not end well. These will be the people pushing wotc into digital products and pressuring them to produce ever increasing revenue and growth. I think if wotc makes a misstep in the next few years, it is because they get too ambitious, both with licensing and digital products. Like, this movie better be a hit or it's back to the drawing board.

 

[payn]

Why would Hasbro spin off a cash cow?

There be tons of money in killing cash cows. Hedgefunders are butchers.

 

[GMforPowergamers]

"Hey this part is super successful you should cut it off" that doesn't make sense to me...

and I don't know that WotC would be better or worse or just the same without hasbro... but it grew this big WITH hasbro

 

[Alzrius]

Because the stockholders who own the company would gain shares of WotC and make money? Profits would be siphoned off into stockholder dividends rather than folded into the larger company's margins.

That's the long and short of it, in terms of the upside of such a move. While Hasbro, as a corporation, wouldn't benefit unto itself, the individuals on Hasbro's board would almost assuredly be the people holding the majority of the stock in any scenario where WotC was turned into its own company. Since the idea is that its revenues would shoot up if it became its own corporate entity, those stockholders would gain a lot of money, and Hasbro as a corporation would likely survive the loss.

...at least, that's presuming I'm understanding the proposal correctly.

 

[EzekielRaiden]

"Hey this part is super successful you should cut it off" that doesn't make sense to me...

and I don't know that WotC would be better or worse or just the same without hasbro... but it grew this big WITH hasbro

Think of it less as "cutting off" and more as "compartmentalizing." Keeping companies together can lower bureaucratic costs (since they share a common infrastructure) but can make it harder to turn investment into profit (since...they share a common infrastructure). Spinning off WotC as its own company would, in all likelihood, give every current (major) shareholder of Hasbro equivalent shares of the new company, so from the standpoint of "where does the money go" it would not change by doing the spinoff.

Yes, sometimes you spin off secondary components in order to then sell the separated company, but that's far from the only reason to do such separations. Sorta like how takeovers and buyouts don't always work the way one would think--it is actually possible to have a reverse takeover, where the company being bought is using the buyer in order to change its name (often for reputational reasons), while the board will keep all the members from the company being bought and cash out those from the company doing the buying.

 

[Guest 7034872]

Greed...definitely my second-favorite sin.

Now, what's the movie and what's the real quote?

 

[Jacob Lewis]

Greed...definitely my second-favorite sin.

Now, what's the movie and what's the real quote?

Devil's Advocate. Gimmie my prize.