Here’s Why Investors Are Bullish On Disney Despite Its Proxy Fight With Billionaire Peltz

Topline

Disney shares hit a two-month high Thursday after billionaire activist investor Nelson Peltz launched a proxy fight to gain a seat on Disney’s board of directors, as the expansive entertainment empire faces yet another high-profile challenge to its corporate structure.

Disney CEO Bob Iger is facing a challenge from billionaire Nelson Peltz.

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Key Facts

Disney stock soared 3.8% to $100 on Thursday, its highest share price since early November.

Peltz’s hedge fund Trian disclosed Wednesday that it owns 9.4 million shares of Disney, a stake worth about $940 million and representing about 0.5% of the company, also unveiling restorethemagic.com to rally shareholder support during its power struggle.

The firm outlined several changes for the “company in crisis” Disney to turn around the stock that’s far underperformed the market in recent years despite being “one of the most advantaged consumer entertainment companies in the world,” including reinstating stock dividends by 2025, setting a clear succession plan for Disney’s 71-year-old CEO Bob Iger and prioritizing profitability in its streaming business.

Trian’s investment of such a large sum in Disney “highlights the underlying value of the shares,” Loop Capital analyst Alan Gould wrote in a Thursday note to clients, while Bloomberg Intelligence’s Geetha Ranganathan told Yahoo Finance the proxy fight helps “keep management honest, it keeps them on their toes, especially when it comes to that issue in succession.”

In a release, Disney urged shareholders to vote against Peltz in its upcoming annual meeting, also naming former Nike CEO Mark Parker as its new chairman.

Forbes Valuation

Peltz is worth $1.4 billion according to Forbes’ latest calculations. Peltz sits on the board of Unilever, Wendy’s and the Madison Square Garden holding company and previously served on Procter & Gamble’s board after a successful proxy battle.

Key Background

Iger began a two-year term as Disney’s CEO in November after a stepping down from the role in 2020, sending the company’s stock up 7% as investors heralded the return of Iger’s “magic.” The Wall Street Journal reported in November that Trian purchased about $800 million worth of Disney shares and did not back Iger’s return, though Peltz’s firm said this week it did not want to force Iger out. Among Peltz’s top issues with Disney’s leadership was the company’s $71 billion acquisition of 21st Century Fox in March 2019, telling CNBC on Thursday that “Fox hurt this company” and turned “what was once a pristine balance sheet into a mess.” Gould says he’s “highly highly confident that the value created from buying Pixar, Marvel and [Lucasfilm] far exceeds any over-payment on Fox.” Last year, Disney faced another proxy challenge from a billionaire investor, Third Point’s Daniel Loeb, staving off Loeb’s request to spin off ESPN but agreeing to appoint a Loeb-backed member to its board.

Contra

Ranganathan was fairly pessimistic on what the power struggle could mean for Disney, telling Yahoo Finance it may provide an “unnecessary distraction” for Iger and the company. Gould, who was far more bullish overall on what Trian’s push means for Disney, also noted the “battle will be time-consuming and costly.”

Surprising Fact

Disney shares are down 10% since the 2019 Fox acquisition, compared to a greater than 40% gain for the S&P 500.