Disney stock (DIS) has recovered from its multi-year lows in 2023. But investors are still grappling with continuing questions ahead of the company's earnings on Wednesday. Will Nelson Peltz, the activist investor at hedge fund Trian Management, succeed in revolutionizing the entertainment world? Giant board?
Shareholders are unlikely to get an answer anytime soon. If the proxy fight continues until the vote, the shareholders' meeting scheduled for April 3 will ultimately decide the board's fate.
Wall Street watchers see the battle as a noisy distraction for CEO Bob Iger, who is currently in the midst of resetting the company's strategy. Nevertheless, the proxy fight continues to linger and cloud its goals.
Trian Fund Management, which favorably owns $3 billion in common stock, made the final decision last week after announcing plans to name Peltz and former Disney CFO Jay Laslo to the media giant's board of directors. submitted a power of attorney.
Mr. Laszlo is the second former Disney executive to publicly join Mr. Peltz's push to revamp the board. Former Marvel executive Ike Perlmutter has entrusted his stake in the company to Peltz, making up the majority of Trian's more than 30 million shares in the entertainment giant.
Mr. Peltz ended a previous proxy battle with Disney a year ago after the company made various cost-cutting efforts. Last fall, as Disney stock plummeted, he revived the fray.
How we got here
Trian cites tens of billions of dollars in lost shareholder value, lower consensus earnings expectations for the next two years, and disappointing content from the studio as some of the reasons it is seeking a board shakeup.
“It is unfortunate that a company as iconic as Disney, with so many challenges and opportunities, has refused to seriously engage with us, its largest current shareholder, regarding representation on its board of directors,” Peltz said. said in its first proxy statement last month.
He said the current board lacks a “spirit of ownership” and is primarily made up of traditional directors and hand-picked successors, with CEO succession planning, a path to streaming profitability, and more. It added that it had failed to address some of the company's biggest problems. A box office revamp.
In a new letter to shareholders dated February 1, titled “Restore the Magic,” the activist hedge fund urges management to implement an “actionable” plan. The company announced that it will begin a review of the company's creative processes led by the board of directors. Streaming business, theme park business, executive compensation and successors.
As part of Mr. Tryon's proxy statement, Mr. Peltz announced that the two existing board members he is seeking to replace, former Mastercard executive Michael Froman and Maria Elena Lagomasino, CEO of wealth management company WE Family Offices, Named.
In a statement to Yahoo Finance, a Disney spokesperson said Froman and Lagomasino are “highly valued and dedicated members” of the company's board of directors.
Disney said it has made “significant progress” in strategically realigning its business to drive growth and create shareholder value.
Some of the changes include price hikes and a crackdown on password sharing across the streaming service and parks business, as well as the introduction of new revenue streams such as an ad-supported tier for streaming service Disney+.
The company also said that Mr. Iger's contract is set to expire at the end of 2026 and that he is “actively engaged in the high-priority work of succession planning.”
Other activists join the fight
As the proxy battle gets into full swing, other shareholders are also joining the fray. Trian is backed by fellow activist investor Mr. Ancora.
Meanwhile, ValueAct Capital has taken on Mr. Peltz, giving Disney a further boost in its fight against the billionaire investor. The activist has signed an information-sharing agreement with Disney, guaranteeing support for the media giant's recommended list of director candidates in exchange for information.
And Blackwells Capital, which has a $5 million stake in Disney, nominates studio executive Jessica Schell, Tribeca Film Festival co-founder Craig Hatkoff, and TuskRabbit founder Leah Solivan for board seats. did.
In a letter to shareholders on Tuesday seen by Yahoo Finance, the hedge fund said Disney should consider breaking up the conglomerate into an “independent public company.”
“Disney may simply be too complex for a single successor to Mr. Iger to manage holistically, and Blackwells believes that it is the board's responsibility to oversee this type of analysis in the normal course of events.” We believe that,” the letter states.
Disney did not immediately respond to a request for comment from Yahoo Finance about the letter or the potential separation. The company insisted it would only support current members and encouraged shareholders not to vote for Tryons or Blackwells' respective candidates.
“Disney Pastime”
Wall Street analysts say Mr. Peltz's path to victory will be difficult.
“Disney is a huge company, so it's going to be very difficult for Mr. Peltz to raise enough stock to have a real chance of winning votes,” said Doug Kreutz, managing director at TD Cowen. “You own stock because you believe in Bob Iger, and Bob Iger says he doesn't want Nelson Peltz on the board.”
Kreutz said the proxy fight was a “distraction for Disney” and that Iger was focused on turning the business around during a particularly difficult time for the industry.
Steve Shiffman, a former media executive and adjunct professor at Georgetown University's McDonough School of Business, emphasized that point to Yahoo Finance, saying, “These activists are trying to figure out how the market is structured in the media. “We don't fully understand how we are making meaningful and impactful change.”
Schiffman pointed to the industry's ever-changing economics, with TV advertising falling off a cliff and a shift away from linear TV as cord-cutting increases.
Competition is also fiercer than ever, with traditional companies launching unprofitable streaming platforms as content costs soar as viewers drastically change their viewing habits post-pandemic.
“The smartest media executives in the world right now are seriously wondering what to do here, and there are no easy answers,” Schiffman said.
“At the end of the day, I actually think the senior management team at Disney is very good. I've seen some companies where that's not the reality. I don't think that's the case with Disney.”
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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