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Alternative Investment

Disney Takes On Proxy Fight With Activist Investor Nelson Peltz

Key takeaways

  • Disney is facing a proxy battle with shareholder Nelson Peltz, who is gunning for a spot on the company’s board.
  • Peltz is a largely successful investor with a history of investments in consumer goods.
  • This is Disney’s first proxy battle in nearly two decades.

Disney has undergone some major changes in recent months. First, Bob Iger retook the reins as the company’s CEO. More recently, he announced that hybrid employees would need to start spending at least four days a week in the office.

Adding to the complications, Nelson Peltz has begun a proxy fight at the company, demanding a seat on Disney’s board of directors. This could send shockwaves through the company. Here’s what shareholders need to know, and how Q.ai can help.

Who is Nelson Peltz?

Nelson Peltz is a billionaire investor and founding partner of Trian Fund Management, an alternative investment management firm. He is also the current chairman of Wendy’s, Sysco and the Madison Square Garden Company. Additionally, he previously worked as a director at multiple other businesses, including H.J. Heinz.

Peltz has a long history of investing success. Before becoming Heinz’s director, he initiated a similar proxy battle that added two people to the board.

What’s happening?

Disney has struggled over the past year, seeing its stock price plummet from a high of almost $160 to its current value of just under $100. This fall in stock prices comes on the back of losses from its streaming services. It is expected that these losses will continue for the next year.

Overall, Disney has lagged behind the S&P 500 and other media companies, producing notably lower returns than its competition since 2014.

Peltz has taken the role of activist investor and is currently fighting for a seat on Disney’s board. This would give him, and any affiliates he can also get on the board, more power over the running of the company.

To that end, Trian Partners released an overview called “Restore The Magic.” It detailed Peltz’s candidacy for Disney’s board of directors in opposition to the company’s proposed slate of directors.

Shareholders are ultimately responsible for electing directors, so Trian Partners needs to win over investors to get a spot on the board. Though Trian owns a $1 billion stake in Disney, that is only about half a percent of the company, meaning many investors will need to side with Peltz to put him on the board.

One argument that Peltz has used to show the company’s need for new perspectives is its recent $71.3 billion acquisition of 21st Century Fox, which he claims put the company “through the wringer.” He argues that the acquisition is what forced Disney to cut its dividend, which it had paid for 57 years, and that the dividend cut was a major negative for investors.

This is the first significant shareholder battle Disney has seen since 2004 when Roy E. Disney and Stanley Gold fought to oust then-CEO Michael Eisner. They managed to get 45% of the shares to deliver a vote of no confidence in Eiser.

Why Peltz wants a seat

Given his belief about Disney’s recent actions and successes (or lack thereof), Peltz thinks that taking a spot on the board will help him guide Disney to greater success.

Peltz claims to support Disney’s current management and CEO, Bob Iger. However, he says that his investment firm believes the company should be performing better given its resources and assets. They plan to “offer new perspectives to improve performance” for the company.

Peltz has succeeded when taking spots on the board of other companies, such as H.J. Heinz and the Madison Square Garden Company. His reputation and presentations about Disney’s recent lack of success may help convince some investors.

Detractors argue that Peltz’s track record is mostly in the consumer space rather than media. Given that Disney is a media giant, Peltz’s previous experience may not be applicable. Peltz has argued back, citing his investments in Lionsgate, Time Warner, and Comcast. Nevertheless, he never served on the boards of these companies.

What it means for investors

For everyday investors, not much will change, even with this proxy fight. Significant shares are owned by large institutional investors, meaning that Peltz will mostly campaign to get those investment firms on his side.

Though individual investors will have the chance to vote for the board of directors and can support Peltz or Disney’s slate as they see fit, given that Disney has more than 1.8 billion shares outstanding, few individuals own a large enough stake to move the needle on this vote.

Investors will want to keep an eye on the proxy fight. Both sides will likely spend large amounts campaigning to support their directors’ slate. The winner will have significant influence over the company until the next election. Investors may reconsider their positions depending on which side they support and which side ultimately wins the vote.

Investing can be difficult in the best of times, but shareholder battles make things even more confusing. If you’re looking for investing help, consider working with Q.ai. Its artificial intelligence can help build a portfolio for any economic situation and financial goal.

The bottom line

Disney has faced turbulent times over the past few years, and that turbulence is set to continue thanks to the company’s first proxy battle in almost two decades.

It remains to be seen whether Peltz will manage to secure enough support to win a spot on the board and if he’ll be able to help guide Disney to greater success, but investors are sure to be paying close attention to the campaigning.

Download Q.ai today for access to AI-powered investment strategies.

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