I read that by the time MS acquired Tango and Hi-Fi Rush was released, most of the developers and management had already quit, so MS basically only owned the IP anyway. Tango allegedly had nothing in the pipeline, and the few people who were left were working on nothing, and there were no leads to start the process of developing a new game.

Not sure how true it is, but in that case it would make some sense to just shut down the studio, because the alternative would be essentially starting a studio from scratch.