In the recent Disney proxy fight, was victory secured by Nelson Peltz?
Activist investors like Nelson Peltz of Trian Partners aren't titled for nothing. Reports suggest that Peltz has shed his entire stake in Walt Disney (DIS) (-0.35%), as per sources from financial outlets like Barron's and CNBC. He allegedly sold off more than 32 million shares at roughly $120 each, a price point last seen on April 5, the day following his failed attempt to claim two seats on Disney's board in a proxy fight.
If these reports are accurate, Peltz seems to have made a shrewd move in the short term. Disney's shares have dipped 18% since the annual shareholders' meeting eight weeks ago, making Peltz's decision to sell profitable, pocketing almost $4 billion and around $1 billion in additional gains. (Billionaires know a thing or two about money.)
Proxy Battles: Worth the Fight
Although Peltz may come off as an inconsequential figure in the boardroom during the past couple of years, his efforts have driven Disney to be more transparent, potentially earlier than planned. Announcing improvements in advance can help retain support for the current board of directors.
Disney's Q1 report for 2022, released in February, was a goldmine for investors, filled with positive data that boosted the stock. Did Disney actually need to boost its dividend by 50% five months ahead of its release? Or what about announcing its first buyback in six years?
Disney's financial strategy was already pointing towards better profits before Peltz entered the picture. However, did Disney's aggressive move to outspend its streaming competitors to secure popular titles like Taylor Swift's films before the proxy vote deadline appear coincidental?
Even if Peltz failed to claim a seat on the board, his proxy battle still yielded profit for Disney shareholders who had been underperforming the market. Cashing out and moving on is the course of action for experienced investors, but long-term Disney investors need not mirror Peltz's decision.
Disney's Potential
It's no surprise that Disney shares have taken a dip post-shareholder vote. February's report had already painted a bullish picture, and it was difficult for May to top it. Furthermore, the economy necessary for Disney's theme parks, cruise ships, and premium streaming services to flourish seems to be weakening.
However, I remain confident in Disney's long-term prospects. Its theme parks remain the industry's crown jewel, recording per-guest monetization metrics significantly above pre-pandemic levels. While this year has been challenging for cinemas, Disney still has a strong slate of films scheduled for the second half of the year. Its streaming service reported profitability in the latest quarter and should maintain steady profits by year's end.
Although the stock is experiencing some lows following its proxy-battle high, bargains do abound in an otherwise pricey market. Buying Disney shares at 18 times projected earnings for the following fiscal year seems like a steal.
Peltz may have better ventures for his funds, but the leading entertainment stock remains attractive at current prices for those investing for the long haul. Peltz may have lost the proxy battle, but he ultimately won the war.
Those who choose to stay put are knowledgeable about Disney's hurdles, as well as its advantages. Peltz is an activist, I am a "passivist," and it seems we can both come out victorious in the long run.
After making a profit of nearly $4 billion from selling his Disney shares, Peltz could now have more funds for future investing opportunities in the finance world. With Disney's shares dipping since the annual shareholders' meeting, it presents an attractive opportunity for long-term investors looking to purchase the leading entertainment stock at a lower price.
