Disney activist investor: Nelson Peltz’s Trian takes DIS stake amid Bob Iger’s return to the Magic Kingdom
The Walt Disney Company (DIS) saw a slew of activist investor activity in 2022 as hedge funds owned by Nelson Peltz and Daniel Loeb took stakes in the entertainment giant.
By December 2022, Loeb’s Third Point managed to place its candidate on the Disney board to advocate for proposals, such as the spin-off of sports broadcaster ESPN. While Peltz’s Trian Partners was reported to be keen on increasing its Disney stake to gain a sizable influence on the company’s future roadmap.
Furthermore, the comeback of Robert Iger as Disney chief executive in November 2022 means that shareholders can expect interesting times for the company in 2023.
Here we take a look at activist investors at Disney and the latest company news.
What is Disney?
The Walt Disney Company is an entertainment firm best known for its iconic Mickey Mouse cartoon and popular amusement parks.
The company originally started as an animation studio in 1923 before opening amusement parks and producing live-action films in the 1950s.
Disney issued its first over-the-counter stock in 1940. In 1957, the company conducted an initial public offering (IPO) on the New York Stock Exchange (NYSE) at a price of $13.88 per share.
Over the decades, Disney became an entertainment juggernaut following the acquisition of Toy Story animator Pixar in 2006, Spiderman cartoon producer Marvel Entertainment in 2009, Star Wars creator Lucasfilm in 2015 and National Geographic channel owner 21st Century Fox in 2019.
The company’s media and entertainment assets include sports broadcaster ESPN, subscription streaming services Hulu and Disney+, and television network ABC.
What is your sentiment on DIS?
Disney stock price analysis
Historical Disney stock price study shows Disney’s six-year rally between March 2009 and August 2015. During the period, the stock surged by as much as 700% from a then six-year low of about $15 in March 2009 to a high of $122 by August 2015.
After its 2015 high, Disney stock price started seeing weakness as competition in the video entertainment sector heated up. In parallel, streaming service Netflix (NFLX) emerged as Disney’s biggest threat with growing popularity and in-house content production capabilities.
The end of 2019 brought new challenges for Disney’s business model in the form of a pandemic. The Covid-19 lockdowns that followed in 2020 sent Disney shares crashing to a multi-year low of $79 in March 2020.
Investors fretted over the closure of Disney World and related theme parks and resorts that had contributed over 37% of the company’s revenue in the full year ended September 2019.
However, Disney’s vast home entertainment library and its growing market share of streaming services such as Disney+, Hulu and Hotstar came to its rescue.
The company’s 2020 full-year earnings reported its direct-to-consumer and international revenue rose 81% from a year ago to nearly $17bn.
The easing of Covid-19 lockdowns allowed Disney’s theme parks to reopen, supporting the stock’s surge to an all-time high of $203 by March 2021.
In 2022, Disney stock value endured a prolonged downtrend from the start of the year as the pandemic tailwinds for its streaming services faded and business conditions soured due to high inflation and rising interest rates.
On 9 November 2022, Disney stock saw its worst intraday session in over 20 years following disappointing Disney news on the earnings front.
Disney (DIS) live stock price
Disney slumped 13.1% in a single session after missing analyst earnings expectations. The company said quarterly operating loss at its unprofitable direct-to-consumer streaming business widened from $0.8bn to $1.5bn in the fourth quarter of 2022.
Disney closed 9 November 2022 at $86.75, its lowest since March 2020. At the time of writing on 13 December 2022, Disney share price had recovered to over $94.
Disney activist Investor: Nelson Peltz and Daniel Loeb pressurise Disney
2022 has also been a year for activist investors at Disney. In August 2022, billionaire investor Daniel Loeb’s hedge fund, Third Point, disclosed a near $1bn stake in Walt Disney.
Loeb pressed on a number of agendas, including spinning off sports channel ESPN and acquiring the remaining stake in streaming service Hulu ahead of its planned acquisition in 2024.
While the market is not quite sure if Loeb’s proposed changes will be implemented, the hedge fund owner has managed to get his candidate on the Disney board.
On 30 September, Disney announced an agreement with Third Point to appoint Carolyn Everson, former marketing solutions head of Meta Platforms (META), to join the entertainment giant’s 12-member board.
Later in November The Wall Street Journal cited inside sources in revealing that activist investor Nelson Peltz’s hedge fund, Trian Fund Management, had acquired a stake worth more than $800m in Disney.
That Disney stock news came around the same time the company announced the return of Robert Iger as the chief executive of Disney on 20 November.
Iger had spent over four decades at the company, including 15 years as its CEO, before retiring in 2020.
The WSJ report said that activist investor Peltz were in favour of having Iger back as Disney’s head.
Peltz and Trian Partners were also looking to increase their stake in Disney to gain more influence on company proceedings. The WSJ report suggested that Trian Partners’ stake in Disney was less than the 5% disclosure threshold.
Trian Partners is also seeking a place as a Disney activist investor in order to push for improvements and cost-cutting measures.
The market reacted positively to news of Iger’s comeback and Peltz’s activist investor stake. Disney saw its best intraday gain on 21 November 2022 as the stock closed 6.3% higher.
Investors were hopeful that Iger’s experience and activist investor pressure could shape Disney’s future stock price prospects.
Analyst views on Disney
Investment research firm Morningstar analyst Neil Macker called Iger’s return to Disney a “stunning move”.
Macker said Iger’s close relationship with Hollywood will help “lighten some of the relationship strain that arose from the pandemic". During former Disney CEO Bob Chapek’s tenure, the company was sued by actor Scarlett Johansson for releasing the movie ‘Black Widow’ on its subscription streaming service.
While Iger was expected to make changes to how Disney was run under Chapek, Macker said Iger will continue to “emphasise the central role of streaming at Disney.”
In a 13 December note, Morningstar lowered its fair value estimate for Disney stock to $155. The agency said:
When looking for Disney stock forecasts, it’s important to bear in mind that analysts’ forecasts can be wrong. We encourage you to always conduct your own due diligence before trading looking at the latest news, technical and fundamental analysis, and a wide range of commentary.
Remember, your decision to trade should depend on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.
FAQs
Is Disney a publicly traded company?
The Walt Disney Company is listed on the New York Stock Exchange under the ticker ‘DIS’.
Who owns Disney?
Shareholder data compiled by CNN as of 14 December showed that the top three shareholders of Disney were The Vanguard Group, BlackRock Fund Advisors and SSgA Funds Management.
Is Disney a good stock to buy?
If you are interested in investing in Disney it is important to conduct your own research. Always remember your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never invest more than you can afford to lose.
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