Yesterday, Nelson Peltz made it clear that he intends to move forward with his threatened proxy war with the Walt Disney Company. Peltz wants to add himself and former Disney CFO Jay Rasulo onto the Disney board to course-correct the company that keeps hemorrhaging money. Upon his announcement, Disney stock did bump to as high as a bit above $93 but has since settled in the $92 range.
Peltz plans to meet with proxy attorneys Glass Lewis and ISS next month to begin lobbying shareholders to his side. Peltz’s Trian Fund Management has significant Disney stock, mainly due to the ousted Marvel head Issac (Ike) Perlmutter.
The plan is to reach out to shareholders in March ahead of the Annual Shareholder Meeting in April.
On January 18, Peltz filed a preliminary proxy statement listing reasons why he and Rasulo should be added to the Walt Disney Board. His goals include raising the Disney+ profit margin by 5% by 2027, from 15% to 20%, aligning with Netflix levels.
According to Michael Nathanson of MoffetNathanson, The Disney+ streaming service seems to be “the crux” of Peltz’s argument.
When asked by CNBC about the margins that Peltz is trying to achieve and if it’s achievable, Nathanson indicated that while we do not have all the information, theoretically, it is possible. Still, investors need to be made aware it is possible.
He said, “In theory, Disney has advantages Netflix does not have. The library content. They have kids’ content that works globally. They have franchises they own. They own ABC and other networks. They should be able to get into that range, and I think the investment community is really not believing that’s possible, and therefore the Disney company needs to put more emphasis on how to get there…. To me, when I listen to his [Peltz] arguments, that is the crux of the debate, in my view, of what people need to hear more of.”
He continued by discussing how, since the pandemic, the investment community has lost faith in streaming, citing a lack of goalposts, the strategy being a “work in progress.” Ultimately, the faith is gone as investors do not believe it could achieve a value close to Netflix.
Nathanson suggests Iger lay out a better plan. With Hulu integration, Disney needs to communicate more with investors about the plan. He says it’s about laying a foundation, and he seems to agree with Peltz about that: “To me, 2024 has to be about laying the foundation for how streaming could move into that band of profitability between 15-20%. I think that’s Trian’s major argument, and if I was them I would keep pushing that, and I think that’s where they could get reception from investors.”
Basically, investors need to hear more from Disney.
You can watch that interview below.
Besides the increased streaming revenue, Trian wants Disney to change the ESPN model to a direct-to-consumer service by late 2024-2025. The reasoning is that a change needs to happen as the cable subscription model is changing. However, with this change, Peltz wants more short-term profitability targets. This would likely make investors feel more secure and could boost the stock.
Leading up to the April meeting, Peltz also plans to start using X (Twitter) to campaign and return to his website RestoreTheMagic.com, which he started last year when he threatened to push a proxy war before the 2023 Annual Shareholder Meeting. Ultimately, he stepped back to “wait and see” after Disney CEO Bob Iger said he was aggressively cutting costs to maximize profit.
Since then, almost every Disney theatrical release has bombed at the box office, with only “Elemental” and “Guardians of the Galaxy Vol. 3” making a profit. Disney+ Marvel shows have continued to decline in viewership, and “Ant-man and the Wasp: Quantumania” and “The Marvels” failed terribly at the box office.
Last year, stocks dropped to under $80 per share as investors grew increasingly leary. No matter who wins this “battle,” something needs to change. Maintaining the status quo isn’t going to fix the issues.
What do you think? Comment and let us know!
Pirates & Princesses (TM) (Stylized as PNP) is an independent, opinionated News and Information site focused on Travel, Entertainment, Fashion, the “Geek Girl” Lifestyle, and more. We focus heavily on Walt Disney World, Disneyland, Universal Orlando Resort, and other themed entertainment and travel destinations. Our news staff includes former theme park and entertainment industry employees, journalists and dedicated pop culture and theme park enthusiasts. Opinions expressed by contributors do not necessarily reflect the views of this site, our affiliates or our sponsors.