A self-described “investor rights law firm” filed a lawsuit Wednesday alleging that Hasbro, the tabletop gaming and toy company, misrepresented its excessive inventory to investors, something the firm says is a violation of federal securities laws. Polygon reached out to Hasbro for comment and has yet to hear back.
Bernstein Litowitz Berger & Grossmann (the law firm) filed a complaint in a New York court on behalf of the West Palm Beach Firefighters’ Pension Fund, asking the court to grant the case class action status — meaning other investors and stock purchasers can participate. Hasbro, like other gaming companies, saw a boost in interest and sales during the pandemic, when people were looking for things to do in their homes; games were an obvious choice. The lawsuit alleges Hasbro purchased inventory to meet that demand — but ended up buying too much. Hasbro allegedly told investors the high purchasing was necessary to “mitigate supply chain risk and meet consumer demand” ahead of the 2022 holiday season, according to the lawsuit. When that inventory sat, Hasbro said the stock “reflected outstanding and anticipated demand” and not a decreased demand. The lawsuit alleges Hasbro was intentionally misleading investors and knew it “overpurchased inventory to an extend that significantly outpaced customer demand.” The timeline makes sense: 2022 is when the world started opening up more broadly, and people were eager to get out of their houses.
Hasbro announced in 2023, in a preview of its 2022 financial report, that revenue was down due to poor sales in the toy market. To mitigate that loss, it laid off 15% of its staff — around 1,000 people. Despite that, Hasbro allegedly continued to tell investors that it didn’t have an inventory problem. In October 2023, an investor asked about Hasbro’s stock, to which Hasbro chief operating officer Gina Goetter said Hasbro was spending $50 million to move and market inventory and as an “obsolescence cost,” which is corporate speak for outdated, devalued inventory.
Because of all this — especially the October 2023 financial disclosures — stock prices declined and investors lost money, the lawsuit alleges, to the tune of a loss of $831 million in shareholder value. The stock value Hasbro previously had, according to the lawsuit’s claims, was due to inflated prices due to the lack of disclosures. The lawsuit states that Hasbro stock is owned by “hundreds or thousands” of investors who would be impacted. The law firm is asking the court for damages due to the alleged violation of the Exchange and Securities Act, which requires publicly traded companies to be honest and transparent to shareholders.
In its most recent earnings report, filed on Oct. 24, Hasbro reported a 15% decline in revenue. Its inventory, according to the report, was down 39% over the last year’s third quarter. Hasbro experts the company to be down 14% overall in 2024.
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