Disney Shares Soar 6% After Earnings Report and New Announcements in Response to Activist Investor Nelson Peltz
In a bold move to counter activist investor Nelson Peltz, Disney has not only posted impressive earnings but has also made a series of exciting announcements that have sent its shares surging by 6% in after-market trading. The company’s actions not only aim to excite its employees and shareholders but also to put Peltz in his place.
Peltz, the founding partner and CEO of Trian Fund Management, has launched a proxy fight against Disney, seeking to replace current board members Michael Froman and Maria Elena Lagomasino with himself and former Disney Chief Financial Officer Jay Rasulo. However, Disney’s higher profits and string of content and partnership announcements appear to be a direct response to Peltz’s concerns about the company.
Disney Chief Executive Bob Iger expressed his frustration with Peltz, stating, “The last thing we need right now is to be distracted by an activist or activists that have a different agenda and don’t understand our company.” During the company’s first-quarter earnings conference call, Iger confidently declared that Disney has turned the corner and entered a new era.
Peltz, who previously took a stake in Disney last year before abandoning and then renewing his proxy fight threats, responded to Disney’s actions by stating that he won’t back down this time. His firm, Trian Fund Management, released a statement saying, “It’s deja vu all over again. We saw this movie last year, and we didn’t like the ending.”
Disney’s flurry of announcements this quarter has been hard to keep up with. ESPN has finally set a launch date for its highly anticipated direct-to-consumer service, which is expected to debut in August or fall of 2025. In a significant move into the gaming space, Disney is acquiring a $1.5 billion stake in Epic Games, the maker of the popular game Fortnite. Disney CEO Bob Iger referred to this as the company’s “biggest foray into the gaming space ever.” Additionally, Taylor Swift’s Eras Tour film will be coming to Disney+, and Disney has increased its dividend by 50%.
One of the most exciting announcements is the sequel to the beloved film “Moana,” which is set to hit theaters in November. This highly anticipated release is expected to be Disney’s biggest box office hit of the year. Furthermore, Disney is on track to meet or exceed its targeted spending cuts of $7.5 billion by the end of fiscal 2024, and the company expects full-year fiscal 2024 earnings to increase by at least 20% over 2023.
All of these announcements come on the heels of Disney’s joint venture with Warner Bros. Discovery and Fox to offer ESPN in a new skinny bundle of linear networks catering to sports fans. This move allows cable cord-cutters and cord-nevers to access ESPN outside of the traditional cable bundle for the first time.
The timing of these announcements is no coincidence, as Disney faces pressure from activist investors like Peltz and Blackwells Capital. Disney CEO Bob Iger has a vested interest in proving critics wrong and demonstrating the success of his performance and strategy.
Peltz has been vocal about criticizing Iger’s leadership, particularly as Disney’s shares have underperformed the S&P 500 in the past year. Trian has even launched a website called Restorethemagic.com, claiming that Disney has failed to perform for shareholders. Peltz expressed his disappointment with the board’s decision not to welcome him, stating, “This company is just not being run properly.”
Despite Peltz’s criticisms, Iger has made it clear that he has no intention of speaking with him. In a filing last month, Disney stated that the directors considered several factors in deciding not to recommend Peltz, including the fact that he had not presented a single strategic idea for Disney during his two-year quest for a seat on the board.
Disney’s recent actions and announcements demonstrate its determination to stay ahead of its critics and continue its success in the entertainment industry. With a strong earnings report and a series of exciting developments, Disney is proving that it is ready to enter a new era of growth and innovation.