Alta Fox Capital Management, an alternative asset management firm with a 2.5% stake in Hasbro, issued a letter to shareholders explaining how it is nominating five new members to the Board of Directors and laying out a path to reverse Hasbro’s chronic underperformance through spinning-off Wizards of the Coast (WotC) into a tax-free unit.
The letter states that with a reconstituted board and a properly incentivized management team, Alta Fox sees a path that can take Hasbro to at least $200 a share and enable the company to rebuild trust with its customers. This would require spinning-off WotC, establishing a transparent, value-enhancing capital allocation policy, replacing the current “brand blueprint” strategy with a modern operating plan, restructuring executive compensation, and improving investor communication.
Alta Fox, whose 2.5% stake in Hasbro is worth around $325 million, is nominating five independent candidates to the board, one being Jon Finkel. Finkel is often considered the best Magic player in the history of the game and is a managing partner and co-chief investment officer at Landscape Capital Management LLC. Shareholders will vote on director nominees at Hasbro’s annual meeting this spring. Hasbro said in a statement that it will review Alta Fox’s nominees in due course.
Connor Haley, the founder and managing partner of Alta Fox, said that Alta Fox is campaigning for a renewed board of directors to oversee a tax-free spin-off of WotC to maximize value for all stakeholders. In a video posted to the website www.frreethewizrds.com, Haley said despite their best efforts to collaborate with Hasbro’s current board, they insist on doubling down on their brand blueprint strategy which has misappropriated billions of dollars of capital and failed shareholders over the past five years as Hasbro’s shares have underperformed the S&P 500 by over 100% while the board and management have been overpaid.
Alta Fox posted a link to their 100-page investor presentation, where it covers the failings of Hasbro and outlines why the current board is not suited to run WotC, even highlighting how none of the current board members have bought shares in Hasbro in the last ten years. It also details how WotC is undervalued by Hasbro and why it should be a standalone business. It concludes by stating Hasbro should immediately pursue a tax-free spin-off of WotC, which will maximize shareholder value, lead to improvements in capital allocation at both WotC and the remaining company, and result in 100%+ upside over the next three years.
Community members took to Twitter to offer their thoughts on the potential move.