Spin Master's Delisting: A Catalyst for Long-Term Value?

Spin Master Corp. (TSX:TOY), the Canadian toy and entertainment company behind hits like PAW Patrol and Bakugan, was removed from the S&P/TSX Capped Composite Index on June 23, 2025, following a quarterly rebalancing. While the delisting has sparked questions about the firm's standing in the market, a closer look at its strategic moves, licensing power, and valuation suggests this could mark a buying opportunity for investors focused on the long term.

The Delisting: Cause for Concern or a Temporary Setback?

Spin Master's exclusion from the index—effective June 23, 2025—was part of a routine review by S&P Dow Jones Indices. The removal did not cite specific reasons, but market observers point to factors such as declining liquidity, reduced market capitalization, or shifts in sector classification. Notably, Spin Master's shares fell 4% in early 2025 amid tariff uncertainties, leading the company to withdraw its 2025 financial guidance. Such volatility may have nudged its stock below the index's eligibility thresholds.

However, the delisting itself is not inherently negative. Indices like the S&P/TSX Capped Composite prioritize liquidity and market-cap size, and exclusion often reflects short-term metrics rather than fundamental business health. For investors, the key question is whether Spin Master's strategic initiatives and valuation now position it as a contrarian play.

Growth Catalysts: Beyond the Index

Spin Master has been aggressively expanding its content-driven model, which could offset near-term risks:

1. PAW Patrol's Global Expansion
   Spin Master's partnership with DreamWorks Animation to produce live-action PAW Patrol films is a major growth lever. The first film, released in 2024, grossed over $300 million globally, and a sequel is slated for 2026. This franchise's cross-platform reach—from toys to streaming—creates recurring revenue streams.
   

   

2. Bakugan's Revival
   The company's relaunch of the Bakugan franchise via live-action content and updated toy lines has sparked renewed interest. The brand's nostalgic appeal to Gen Z and its potential for global licensing deals could drive sales in coming years.

3. Licensing Deals and Diversification
   Spin Master's licensing partnerships, such as its agreements with Netflix for The Power of Pudding and collaborations with Marvel for toy lines, underscore its shift from a pure toy manufacturer to a content-driven entertainment company. This diversification reduces reliance on cyclical toy sales.

Risks: Tariffs and Valuation Challenges

The company's near-term risks remain clear. Trade tensions, particularly with China, continue to pressure toy manufacturers. Spin Master's 2025 guidance withdrawal highlighted the fragility of its supply chain and pricing environment. Additionally, its valuation—currently trading at a 30% discount to its five-year average price-to-earnings ratio—reflects investor skepticism.

Yet, this valuation creates a margin of safety. Spin Master's price-to-sales ratio of 0.8x is well below peers like Mattel (MAT: 2.3x), suggesting the market has yet to price in its content-driven growth potential.

A Contrarian Play for Patient Investors

The delisting could prove advantageous. Removing Spin Master from the S&P/TSX Capped Composite may reduce passive fund selling, allowing patient investors to accumulate shares at depressed levels. Meanwhile, its strategic moves—such as film partnerships and licensing—are designed to boost margins and reduce reliance on volatile toy retail cycles.

Final Take: Buy the Dip, but Monitor Trade Risks

For long-term investors, Spin Master's delisting is a signal to evaluate its discounted valuation and strategic momentum. The company's shift toward content-driven revenue and its IP portfolio position it for growth, even amid macroeconomic headwinds. However, investors should remain cautious on tariff developments and monitor liquidity metrics.

Investment Advice:
- Buy: Accumulate shares at current levels if the stock dips below C$20, provided tariffs ease.
- Hold: Maintain positions for now, but wait for clearer visibility on 2026 earnings.
- Avoid: Steer clear if trade tensions escalate further, threatening supply chains.

In conclusion, Spin Master's delisting is a temporary stumble for a company with a compelling content-driven playbook. For investors willing to look past short-term noise, the stock could be primed for a rebound—if its films and licensing deals deliver as promised.