Third Point Management, the hedge fund led by activist investor Daniel Loeb, has disclosed the purchase of a stake of up to $1bn in The Walt Disney Company (NYSE:DIS) in a public letter addressed to Disney chief executive officer Robert Chapek.
The approximately 0.4% stake is not the first Disney investment for Third Point, having bought approximately US$150mln worth in shares in the volatile time of early 2020, just as pandemic troubles were arising and Disney was dealing with the departure of long-term company head Robert Iger.
Loeb has a reputation for buying into troubled companies with a view to turning them around, yet in a letter sent to Disney boss Robert Chapek, he seemed upbeat on the prospects of the multinational entertainment conglomerate.
“This quarter’s results are an important proof point that Disney’s complex transformation is succeeding and our confidence in Disney’s current trajectory is such that we have, in recent weeks, repurchased a significant stake in the Company,” wrote Loeb in a letter to Disney head Robert Chapek.
Disney is also leading the streaming wars, with its core Disney+ service adding 14.4 million subscribers in the third quarter while Netflix saw a reduction.
Are changes on the horizon for Disney?
But a string of changes has also been proposed, including a carve out of cable sports channel ESPN, share buybacks, debt reduction and cost-cutting exercises.
Regarding ESPN, Loeb contended that despite the channel generating significant cash flows, “we believe that a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load that will alleviate leverage at (Disney)”.
Loeb wrote to Chapek that Disney's board needs to be refreshed due to "gaps in talent and experience as a group that must be addressed”.
Also in Loeb’s checklist is an acceleration of Disney’s remaining stake acquisition of Hulu from Comcast (NASDAQ:CMCSA) with a view to integrate the streaming service into Disney+ to streamline operating expenses.
Year to date, NYSE-listed DIS shares have fallen 21%.