Browsing their most recent 10Q[1], it looks like they took a substantial loss on their investment in EntertainmentOne[2]. Which they did with borrowed money, meaning they don't have that much equity to lose. If you look at it from a business line perspective, WotC made 2x the profits of the next biggest, on half the revenue.
My read: management bet the company on Film&TV in 2019, and lost so hard WoTC pays the price.
Because layoffs provide profitability, rough as it is.
However! What Hasbro is doing to WOTC is tremendously short term thinking. You do not prune the organizations that are providing all of your liquidity in a time of crisis for fear of pruning the wrong branch and diminishing the growth by sending a message to key people that it’s time to go, which is always possible and arguably likely when you cut.
I believe that Hasbro shareholders should insist on making WOTC’s management team responsible for the whole company, as they have time and again been the backbone of profitability, progressive projects that actually ship and make actual money and have been doing a lot of good decision making in recent years.
Yes I’m aware of the CEO’s criticisms around short term decision making, but he’s always had to answer to the parent company and they are very corporate and MBA-logic oriented.
Now on to the answer to your question, here is the math they look at:
Amazon had $2.8 million in earnings (before interest, taxes, depreciation, and amortization – or EBITDA) for every staff member they laid off in January.
Meta had $3.9 million in earnings for each of the 11,000 staff members they laid off in November. In response to Meta’s cost-cutting strategy, its stock price increased by 19 percent.
Tech giant Microsoft had an EBITDA of $98.8 billion in 2022. This means they earned $9.8 million for each person they laid off in January 2023.
Other companies’ layoffs weren’t as difficult to understand: WeWork ended 2022 with an EBITDA of -$824 million, and Spotify ended its fiscal year with an EBITDA of -$290 million.
Earnings per laid off employee seems like an odd metric. It makes the decision sound more "rational" the more employees are laid off (which is clearly backwards), and would give ridiculous numbers for companies with very few or zero layoffs.
I only skimmed the linked article, but they don't seem to bother justifying why this metric matters.
> have been doing a lot of good decision making in recent years.
Wait, what? Aren't these the same people who tried to rug-pull the D&D license and caused a bunch of MtG drama with new cards that almost crashed the card market? Perhaps those decrees came from Hasbro, but we outsiders can't really know that, can we?
Short term thinking also doesn't matter to investors. They can drop the stock like a hot potato any time they want. There are no incentives built in for long term holding.
Literally, and speaking generally, the stock price might go up due to short term gains? Layoffs are a form of cost-cutting and assuming it doesn’t affect the service or product, this leads to short term increased profits or offsets expected incurred losses? Not everyone playing the stock market is a value investor.
As the fine article notes:
> At time of writing, it’s unclear why Hasbro’s chosen to lay off employees at the single strongest company in its portfolio. This year, Wizards debuted a critically if not commercially successful major motion picture, earned a Game of the Year trophy at the 2023 Game Awards, and was consistently profitable, but Hasbro’s still sacking its employees. It’s the sort of math that only makes sense if you’ve got shareholders to placate.
The market is more focused on next quarter's profits than next years - if layoffs help the balance sheet next quarter, they don't care if game quality suffers and there's less profit in the years to come. Well, it's not that the market doesn't care about next year's profit, but they'll expect the company to figure it out by next year.
Anyone have an idea why?