Shareholders sue Hasbro over allegedly printing too many Magic: The Gathering cards

Two Hasbro shareholders claim the Pawtucket-based toy giant printed too much product for its most lucrative holding, the trading card game Magic: The Gathering, while misrepresenting its strategy to shareholders, according to a federal lawsuit filed Jan. 21

Joseph Crocono and Ultan McGlone filed the 76-page shareholder derivative complaint in U.S. District Court for the District of Rhode Island. A shareholder derivative complaint allows shareholders to seek recovery for harm they believe a corporation’s directors or officers failed or refused to rectify legally. Crocono, who court documents list as residing in Bexar County, Texas, has been a shareholder since 2021. McGlone has been a shareholder since 2020, according to the filing.

The complaint names Hasbro CEO Chris Cocks and 13 other officers and directors as defendants. While the public copy of the complaint has about nine pages redacted, the general arguments remain intact: that Hasbro leadership harmed the company by “overprinting” cards while making deceptive or misleading statements to investors. 

“The Company was overloading the market with Magic sets to generate revenue and to offset shortfalls within the Company,” the complaint alleges. “[A]s a result of the Company’s overprinting of Magic sets, existing Magic cards were devalued.”

The best known local symbol for Hasbro is Mr. Potato Head, the company’s iconic toy. But in 2026, the company relies on Magic cards to keep its coffers flush. 

Magic: The Gathering, along with Pokémon and Yu-Gi-Oh!, comprise “the big three” of trading card games, with each enjoying large and active player bases and secondary markets. Magic — which the New York Times estimated in 2023 to have around 50 million players across its history — is the most senior of the three. First released in 1993, it requires players to build decks and strategize to reduce their opponents’ “life” to zero. The game centers around judicious management of “mana,” a renewable resource used to play cards and activate their effects.  

“Magic cards are sold in randomly assorted packs, and feature levels of rarity in accordance with their chance of appearing in a pack,” the lawsuit explains.

In 1999, Hasbro acquired Magic’s maker, the Renton, Washington-based Wizards of the Coast, for $325 million (or an inflation-adjusted $632 million in 2026 dollars). Under Hasbro, the game has bloomed in popularity. Hasbro’s 2023 annual report cited nearly $1.1 billion in net revenue from Magic. 

The lawsuit identifies 2016 as the turnaround point, the year Cocks was appointed president of Wizards and when the gaming-focused wing of Hasbro “began a meteoric rise as compared to the Company’s other segments,” the complaint reads.

The complaint covers the time period of September 2021 to October 2023 claims Wizards met its 2021 goal to double revenue “well ahead of schedule.” In that same year, Magic accounted for the majority of Wizards’ operating profit, providing $547 million out of $763.3 million in operating profit overall.    

In 2022, Cocks became CEO of Hasbro. Also around this time, the complaint asserts, “Investors and analysts began to grow concerned about the potential that the Company was overprinting Magic cards, and thus exceeding actual consumer demand.”

A former Wizards employee — dubbed “FE 1” in the complaint — alleges that Wizards began overprinting cards in 2018, effectively as an offset for shortfalls in Hasbro’s weaker-performing sectors. According to FE 1’s testimony, this so-called “parachute strategy” led the company to release sets of cards that were “intended to provide roughly $40 million to $80 million” that could compensate for shortfalls elsewhere.  

In 2022, the same year Magic raked in over $1 billion in net revenue, these extra sets accounted for 46% of all Magic releases that year, according to the complaint. 

The plaintiffs argue that Hasbro told shareholders Magic’s growth was based on segmenting products according to player needs, while allegedly withholding that the growth was actually driven by overprinting, and its possible risks, especially when reprinting older, out-of-print and highly sought-after cards.

The lawsuit also digs into the 2022 release Magic’s 30th Anniversary edition, a large, 594-card set that was sold exclusively online. The anniversary set was the most expensive official Magic product when it was released, with booster boxes retailing for $999, and the cards were not eligible for official tournament play.    

The pricey set purportedly sold out in less than an hour, but according to FE 1, “minutes after the release began, sales were stopped by the Company to conceal the observation that sales of the Magic Anniversary Set would be much lower than anticipated.”

A different anonymous employee, FE 6, alleges that he and other Wizards staff “viewed photographs of Magic Anniversary Sets dropped off at a Texas landfill alongside older Magic products.”

The complaint noted that the Q4 2022 earnings for Wizards were significantly short of Hasbro’s projections for year-over-year revenue growth. Then, in Q3 2023, Hasbro announced it had reduced inventory by 27%, while consumer demand dropped 34%, news which preceded a 16.3% drop in the company’s stock price. 

That was bad news for Hasbro, which in 2022 had spent approximately $125 million to “repurchase approximately 1.4 million shares of its own common stock at artificially inflated prices,” the complaint argues, leading the toymaker to overpay for its own stock by about $55.9 million.

The plaintiffs claim they didn’t make a pre-suit demand on the company’s board of directors because it included seven of the defendants. Derivative suits allow for plaintiffs to claim “futility” for a pre-suit demand if the majority of a company’s board cannot be considered disinterested parties.

The complaint is asking the court to “reform and strengthen the Company’s corporate governance,” including approval of a provision that would allow Hasbro shareholders to nominate at least five candidates for an election to the Board. 

Neither Hasbro and the plaintiffs’ counsel responded to requests for comment Thursday.

The company announced last year that it plans to relocate its headquarters to Boston’s Seaport District by the end of 2026.

’A very curious lawsuit’

While Hasbro reaps much profit from Magic, the game’s development remains firmly planted on the West Coast with Wizards, which is still a Hasbro subsidiary.  

So, why file the lawsuit in Rhode Island’s federal court?

Andrew Spacone, a professor at Roger Williams Law School who teaches courses on mergers and acquisitions and securities regulation, said in an interview Thursday that he had only reviewed the complaint briefly. 

But a few things still jumped out at Spacone, who once served as deputy general counsel and head of the litigation group at Textron Inc. On the surface, he said it largely looks like a “garden variety” derivative suit.

Still, fiduciary duty cases usually head to state courts, not federal jurisdictions. It’s “a very curious lawsuit,” Spacone added, because the complaint includes a federal securities claim under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 — anti-fraud provisions that ban materially false or misleading statements when connected to the sale or purchase of securities. 

“This is unusual,” Spacone said. “Normally, a fiduciary duty lawsuit stands on its own.”

Spacone speculated that the plaintiffs are arguing for a 10b-5 violation because they may assume they could “get a more receptive audience in federal district court.” Additionally, Spacone said it may help them maneuver around any limitations on liability for Hasbro’s directors provided by a kind of insurance known as “directors and officers” coverage.  

But every insurance plan is different and, as the suit notes, Hasbro’s specific coverage may not apply in a derivative suit. 

“Based on my experience, the end game for the plaintiffs is a settlement with attorney’s fees for their counsel,” Spacone said. “I would be surprised if this case makes it to trial, but you never know.”

Now, Spacone said, Hasbro can either file a motion to dismiss or respond to the complaint. Summons have been issued in the lawsuit as of Friday, although no court date has been set. 

“You’ll have a better understanding then of what’s going on, but all you have now is, is the plaintiffs’ version of the case,” Spacone added.

As the plaintiffs wait for Hasbro to respond to the summons, the company’s stock hit a 52-week high Thursday, closing at $90.46 a share.