Aug 15 (Portal) – Hedge fund Third Point on Monday announced a roughly $1 billion stake in Walt Disney Co (DIS.N) and said it plans to push the media company into a series of changes, from spin-off of cable sports channel ESPN plans to buy back shares and add new board members.
Billionaire investor Daniel Loeb, who runs Third Point, made an about-face at Disney when he added a new holding in the second quarter, shortly after exiting his position months earlier when fears of rising prices and faster rate hikes sparked a sharp market sell-off .
Now Third Point, which owns around 0.4% of the company known for its theme parks and films like Aladdin and Frozen, is back with praise for the company’s CEO, Robert Chapek, and a list of initiatives that he and the board should be pursuing to fuel growth.
“Our confidence in Disney’s current development is
such that we have bought back a significant stake in the company in recent weeks,” Loeb wrote in a letter to Chapek obtained by Portal. Loeb wrote after Disney said quarterly profit rose 50% and its streaming subscriptions overtook Netflix’s
Chapek has weathered criticism in Hollywood over a 2021 falling out with Scarlett Johansson, star of Marvel film Black Widow, and a political storm over the company’s response to a new education law in Florida, where the company employs about 80,000 people employed.
Disney initially remained silent about the measure restricting classroom discussion of gender identity and sexual orientation, prompting criticism from that community and some staff members. It later condemned the law, prompting Florida Gov. Ron DeSantis to rail against “Woke Disney.” Continue reading
Loeb wrote that management may already be considering changes he is proposing, including cost cutting, debt repayment and stock repurchases.
He said Disney’s board needed a refresh to “find gaps in talent and experience as a group that need to be addressed.” Loeb said he has identified potential directors but declined to elaborate.
Disney said in a statement it “welcomes the views of all of our investors.” It cited the company’s top-line and earnings growth under Chapek’s leadership, adding that its board “has significant expertise in brand, consumer and technology companies.”
Activist investors often advance their agenda by trying to win seats on the board, either through an invitation from the company or by rallying other investors to support the directors in a vote.
A key proposal from Loeb concerns ESPN, which he believes should be spun off to shareholders. He urged Disney to hire bankers and attorneys to “reassess the desirability of the transaction in the current environment,” after Disney had already considered it.
An industry publication, Puck, reported last year that Disney was considering spinning off ESPN as the network lost cable subscribers. The same publication reported last month that that option was no longer being considered and that live sport was seen as the “lying hub” of the company’s business.
Loeb also suggested that Disney accelerate the timeline to purchase the remaining stake in Hulu from minority shareholder Comcast Corp (CMCSA.O) ahead of its proposed acquisition in 2024. That would clear the way for Hulu to integrate with the Disney+ tech platform, and it would save money.
Disney stock, which is down about 21% since January, rose 2.2% to $124.21 as of Monday afternoon. Loeb has previously pushed for changes at companies ranging from Nestle SA (NESN.S) to healthcare company Baxter International Inc (BAX.N).
Like other prominent hedge fund managers, Loeb has absorbed double-digit losses this year and is trying to limit the damage by selling off nearly all tech stocks earlier in the year, sources said. Third Point bought back into Disney at a lower level than when it first invested in 2020.
Reporting by Svea Herbst-Bayliss in Boston and Dawn Chmielewski in Los Angeles Editing by Mark Porter and Matthew Lewis
Our standards: The Trust Principles.