The heirs of Walt and Roy Disney, the founders of entertainment giant Disney (NYSE:DIS), are throwing their weight behind the company’s CEO, Robert Iger, in the ongoing Board dispute with activist investors, including Nelson Peltz. Trian Fund Management of Nelson Peltz is eying two seats on Disney’s board, while Blackwells Capital, another hedge fund, is pushing to nominate its own board members.
The Disney founders’ grandchildren have penned two letters to Disney shareholders, endorsing the company and Iger’s resistance against activist investors. The letters criticized Peltz and other activists as “wolves in sheep’s clothing.”
The letters may bolster Disney’s position in its standoff with activist investors. However, the battle for Board seats is expected to be the most expensive shareholder contest. The parties involved are likely to collectively shell out more than $70 million in preparation for the shareholder vote slated for April 3.
The Background
The proxy battle between Disney and activist investors stems from the disagreement over the company’s strategy to bolster growth and its share price. Last year, Nelson Peltz initiated a proxy contest with Disney. Peltz’s Trian Fund Management contested Disney’s strategy, pointing out the lackluster performance of DIS stock compared to broader market averages.
Trian also noted Disney’s inadequate succession planning and labeled its Direct-to-Consumer strategy as flawed. Additionally, Peltz criticized the company’s excessive compensation practices and high leverage levels.
The graph below shows DIS stock’s underperformance against SPDR S&P 500 ETF Trust (SPY). Notably, the SPY is seen as a proxy for the S&P 500 Index (SPX). DIS stock is down about 2% in five years. The SPY ETF (Exchange Traded Funds) gained about 81% over the same period.
Is Disney a Buy, Sell, or Hold Stock?
Disney stock is up about 24% year-to-date, outperforming the S&P 500’s gain of about 7%. DIS stock has a Moderate Buy consensus rating based on 17 Buys, four Holds, and one Sell. Analysts’ average price target of $116.71 implies 4.6% upside over the next 12 months.
