Hasbro Faces Shareholder Lawsuit Over Magic: The Gathering Set

A new lawsuit filed in Rhode Island by shareholders against Hasbro and its directors alleges that company leadership has mismanaged Magic: The Gathering by overprinting sets of cards, thereby devaluing existing ones.

The complaint, filed by shareholders Joseph Crocono and Ultan McGlone, claims that Hasbro leadership "concealed the true reason" that its widely-criticized, incredibly expensive 30th Anniversary Set was pulled from sale within an hour of its initial release.

The lawsuit, filed against Hasbro CEO Christian Cocks and a number of fellow company directors, alleges breaches of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement, abuse of control, and violations of the Exchange Act. Under Cocks' leadership, the plaintiffs claim Hasbro has been printing far too many Magic: The Gathering sets, reducing the value of existing sets.

This complaint aligns with long-standing concerns from avid players, as Wizards of the Coast has been printing significantly more sets per year than it used to. The lawsuit notes that Wizards released more sets than ever before in 2020, which served to double the revenue of the Wizards segment of Hasbro between 2018 and 2021. In 2022, Hasbro released over five times as many Magic sets as it had in 2016.

The lawsuit claims Wizards released 39 separate Magic sets in 2022, a figure that includes Secret Lair collaborations alongside traditional set releases. Regardless of the exact count, the card release volume has undeniably increased in recent years.

One of the major accusations in the 76-page lawsuit is that Hasbro management used a strategy referred to as the "Parachute Strategy." Allegedly, leadership plotted to "parachute in" new Magic sets whenever there was a shortfall somewhere else in the Hasbro business.

These parachute sets initially consisted of "Masters" sets, which are largely reprints with low production costs. However, as the strategy grew, more sets became involved, including Secret Lair collaborations and the Commander Legends: Battle for Baldur's Gate set.

"As such, the explosive growth in the Magic business noted just prior to and during the Relevant Period [September 2021 - October 2023] was in fact the result of the Parachute Strategy. Notably, in 2022 such 'parachute' Magic sets accounted for 46% of all Magic releases."

The plaintiffs argue that this volume is exceeding consumer demand and that Hasbro leadership is only releasing this many sets to get quick cash to cover up shortfalls elsewhere in the business.

The second, and perhaps most notable, accusation concerns the Magic 30th Anniversary Set. This product was an $999 box containing four booster packs of non-tournament legal reprints of original Magic cards, some of which Wizards had sworn it would never reprint.

The box garnered massive criticism due to its price, the fact that the cards weren't even usable in official play, and the seemingly broken promise regarding reprints of classics such as Black Lotus. According to testimony from several members of leadership shared in the complaint, following the negative reaction from players, management made a plan to "pause" sales of the set if it became apparent that demand was weaker than anticipated.

The company subsequently stated the "sale has concluded, and the product is currently unavailable for purchase," in a post on X (formerly Twitter), implying they had sold out. The lawsuit accuses the company of falsely claiming the product was "out of stock" to make it appear more popular than it actually was.

What happened to the unsold cards after sales were paused? The lawsuit provides a startling allegation regarding the disposal of inventory. Testimony from a former employee cited in the complaint states that the company paused sales less than an hour after the set's release, selling only a portion of its available inventory.

"[Former Employee 6] likewise stated that the Company paused its sales of the Magic Anniversary Set less than an hour after its release, only selling a portion of its available inventory. FE 6 further noted that shortly after the set’s release, he and other Wizards employees viewed photographs of Magic Anniversary Sets dropped off at a Texas landfill alongside older Magic products."

The plaintiffs are asking the judge to rule that they, as shareholders, are adequate representatives of Hasbro and can sue on behalf of the company itself. They are also requesting that Hasbro be awarded damages from each individual defendant and that shareholders be given significantly more power on the board.

This is far from the first time shareholders have expressed displeasure with Hasbro's handling of Magic: The Gathering. The lawsuit mentions a deep dive done by Bank of America back in 2022 regarding the issue of overprinting, which prompted analysts to claim Hasbro was hurting its long-term value with so many frequent set releases.

Despite the controversy, the brand continues to release new products. This year's first set, Lorwyn Eclipsed, is reportedly doing well, having seemingly sold out in most places amid excitement at a return to a beloved plane from Magic's history. The set features a host of super expensive rare cards, topped off with a Showcase Fracture Foil version of Bloom.

The lawsuit represents a significant challenge to Hasbro's current management strategy and its handling of the Magic: The Gathering brand. The plaintiffs are seeking not only financial damages but also a fundamental shift in corporate governance, aiming to give shareholders more power on the board of directors.

As the legal proceedings move forward in Rhode Island, the outcome could set a precedent for how publicly traded companies manage their most valuable intellectual properties and communicate with investors regarding product availability and sales figures.