governance crisis and calamitous stock market trajectory

“Restore the Magic at Disney” : this is the title of the vitriolic presentation of 32 pages published by the fund activist of Nelson Peltz, Trian, which acquired for 900 million dollars (834 million euros) of Disney shares and claims a seat on the board of ‘administration. At 80, Mr. Peltz, whose fortune is estimated at 1.4 billion dollars, has many arguments to make: Disney, which has not distributed dividends for two years, has everything of a disenchanted kingdom.

The company (82 billion dollars in turnover) has a calamitous stock market history, with its share price halving in two years and which has not progressed since 2015 – the S&P 500 index has jumped by half on the period. Disney has multiplied, according to Mr. Peltz, the strategic errors: first, he bought, in 2019, two and a half times too expensive the media activities of Fox (26 times the profitability, against 12 times in the sector) for a amount of 70 billion dollars. He launched into streaming during the Covid-19 pandemic, with his Disney + channel, to compete with Netflix, but it continues to lose money (11.3 billion cumulative dollars, half of what, for example, Meta-Facebook has lost in the metaverse).

He saves face thanks to the income from his cash cow, the amusement parks of Florida and Los Angeles, closed during the health crisis, but whose entry and hotels are now charged a fortune to the American consumer. Mr. Peltz believes that this price-raising policy is unsustainable. Moreover, margins are falling. The company’s costs are not kept: they increase faster than its turnover. All these elements mean that earnings per share have been halved in four years, while free cash flow has been halved by almost nine, from 9.8 billion to 1.1 billion between 2018 and 2022, accuses Nelson Peltz.

Extravagant salaries

Added to this is a major governance crisis: the firm was unable to prepare the succession of Bob Iger (2005-2020), which was extended five times in the last decade, to make way, in February 2020, for to Bob Chapek. He became entangled in the dispute over Florida’s law banning sexual and gender education in schools up to the equivalent of CE2, dubbed “Don’t say gay” (“Do not talk about gay”).

Under pressure from his employees, he finally condemned the law, and the governor of Florida, in response, revoked Disney’s tax benefits at its Orlando amusement park. Unable to turn his business around, Mr. Chapek was abruptly fired in the fall of 2022, replaced by his predecessor, Mr. Iger, who returns at the age of 71.

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