Hasbro CEO Cocks and Execs Sued for Alleged Securities Violations

[TiQuinn]

I know very little about Hasbro and MtG overall, so this may be either basic knowledge but does Hasbro actively participate in this secondary market? Overprinting product can be damaging to the company if it cannot sell that inventory (see TSR circa 1990s), but the damage to the secondary market is not necessarily Hasbro’s concern, or is it?

To me this is kind of like complaining that comic book companies in the 90s made too many foil cover comic books. Well, okay, but why did you think buying a bunch of foil cover comic books constituted a suitable investment?

 

[sevenbastard]

Relentless IP tie-ins, even when said IP makes zero sense in the context of the property.

I have never bought any Magic cards and only played a few time in the 90s so as a complete outsider it does feel like they are just slapping random IP on the cards to make sales.

What i cant say as a outsider is if the majority of Magic consumers like this or not.

 

[TerraDave]

Its short-termism. They pumped up the stock and flooded the market knowing that having too many cards out there will cause future demand to crash.

Or so they say. Will be hard to win in court, but they might get some kind of settlement.

 

[trappedslider]

To be honest part of the OP's post reads like "how dare they not tell me how much my hobby is making",

I'm not really into Magic, but I do follow some MtG-related things online. As I understand it, there are three main issues with the Spider-Man set:

1. Because of rights issues, Wizards can't put Spider-Man cards as such into their online offering Arena. Instead they reskin the cards, so when playing online you don't get Spectacular Spider-Man, you get Ademi of the Silkchutes. This annoys a lot of people who use Arena to practice, because the cards they see online are not the same as the ones they'll be playing IRL, even if they're mechanically identical.

They've done that with all of the universe beyond cards not just spider-man.

I know very little about Hasbro and MtG overall, so this may be either basic knowledge but does Hasbro actively participate in this secondary market? Overprinting product can be damaging to the company if it cannot sell that inventory (see TSR circa 1990s), but the damage to the secondary market is not necessarily Hasbro’s concern, or is it?

as some who still plays and buys MTG, I'll try my best to explain it

The secondary market is what you get when you open a booster pack and sell the cards one by one. Officially WotC doesn't recognize the secondary market. I say officially because back in the 1990s when they tried to print some high value cards to get into players hands, a number of players cried foul and it lead to the creation of the now hated/despised Reserved List. The RL is a "never reprint the cards in playable version" and once a store buys product (boxes) that money goes into WotC's bank. They make no money from the secondary market. Among the players, the surest sign that the ship is sinking with WotC would be them willing to take the heat from revoking the RL. Revoking the RL would wipe out the value of cards (some of which are worth a mortgage payment on a house)

Right now UB is doing well, but the core of the player base the UB sets or hit and misses. This has been acknowledged by the lead on mtg Mark Rosewater, and we're getting back to a more even number of "universe within" sets vs UB sets, this year (I think it's this year)

 

[BrokenTwin]

While I understand the idea behind the Reserve List, I also have to admit that I've never really understood the idea of a piece of bulk-printed cardboard being worth thousands of dollars. But then, I also think "1st Printing" collector value is rather silly. Banking on artificial scarcity staying that way to maintain your "investments" just seems like a terrible idea.

 

[aiouh]

I know very little about Hasbro and MtG overall, so this may be either basic knowledge but does Hasbro actively participate in this secondary market? Overprinting product can be damaging to the company if it cannot sell that inventory (see TSR circa 1990s), but the damage to the secondary market is not necessarily Hasbro’s concern, or is it?

It is very simple.

MtG cards are sold on the social contract that cards are valuable in the secondary market. Hey, this box of realistically worthless printed cardboard is 100 Federal United States Dollars, but people really really value the rare ones. This drives sales and a robust secondary market/trading economy.

Overprinting cards leads retailers to firesale remaining inventory and stock, which breaks this contract for people who bought the shiny box of cardboard for 100 Federal United States Dollars.

Investors are concerned that sales are going to decrease because consumers will be less willing to drop big money on cardboard as they will have less faith in the future value of cardboard.

To me this is kind of like complaining that comic book companies in the 90s made too many foil cover comic books. Well, okay, but why did you think buying a bunch of foil cover comic books constituted a suitable investment?

Whether this is moral or smart or not, is irrelevant, but investors are concerned for WotC's future ability to sell expensive cardboard at a high price which is why they are big mad.

And when I say investory I mean big institutional investors like pension funds, hedge funds and large individual investors that own millions of dollars of shares of Hasbro, not people hoarding 20 boxes of Innistrad in their closet.

 

[TiQuinn]

It is very simple.

MtG cards are sold on the social contract that cards are valuable in the secondary market. Hey, this box of realistically worthless printed cardboard is 100 Federal United States Dollars, but people really really value the rare ones. This drives sales and a robust secondary market/trading economy.

Overprinting cards leads retailers to firesale remaining inventory and stock, which breaks this contract for people who bought the shiny box of cardboard for 100 Federal United States Dollars.

Investors are concerned that sales are going to decrease because consumers will be less willing to drop big money on cardboard as they will have less faith in the future value of cardboard.

Would Hasbro say they've entered into a social contract regarding the secondary market value of their cards? Like, that sounds very much like a collector's justification for why Hasbro is to blame for prices in the secondary market, but that doesn't make it true.

 

[TheSword]

If the plaintiffs can make a successful case that WoTC are breaching fiduciary responsibility when they make more sales then I will be very surprised. Requires a lot of assumptions that I just can’t see being proven.

 

[aiouh]

Would Hasbro say they've entered into a social contract regarding the secondary market value of their cards?

Publicly, no. But if you sell limited run collector's items at increased prices compared to normal print runs and then brag about it for years on your quarterly reports about how this is a great way to make lots of money, it stands to reason that your MtG operations are highly dependent on collectability, and secondary market prices serve as a proxy.

If they can prove that Cocks knowingly tanked Collectibility or acted irresponsibly (discovery and internal documents) they could hold him responsible and go past the Business Judgment Rule.

 

[MGibster]

hey are printing more Magic cards which causes the secondary market to be depressed? I don't follow how that's a securities issue. If someone is gambling on Magic cards on the secondary market that's a them issue.

This one really, really confuses me. What specifically is Hasbro's concern with the secondary market for Magic cards?

They use income from Magic to "prop up" other parts of the company? Uh, isn't that how large companies work in general -- some parts make more revenue than others; some even lose money, but it's the value of the corporation as a whole?

I could see it being a problem if Hasbro is obfuscating where their money is being made. Imagine if you were to invest in Hasbro thinking they had various viable lines of business only to find they've got the one. Suddenly your investment is a lot riskier than you thought. I'm certainly not arguing this is the case with Hasbro, I don't know, but it makes more sense than complaining about the secondary market.