Investors’ appetite for woke up corporatism has its limits, and it normally begins with a drop in the stock price. For further evidence, take a take a look at what is going on on at Disney.
For years, “House of Mouse” was the epicenter of political correctness. Investors largely ignored this circus (including the same-sex kissing scene in kid’s shows) as Disney stock soared.
Not any more. After longtime CEO Bob Iger retired in 2020, successor Bob Chapek has proven far less adept as a revival manager and marketer. Pandemic closures of theme parks haven’t helped. As well as, he was crushed by Florida Governor Ron DeSantis for opposing a law that prevented schools from teaching sex education to 6-year-olds and lost Disney’s special tax status.
A lot of his shows were duds and his streaming strategy failed. Disney’s stock collapsed a lot that Chapek was shown the door after about two years on the job.
Iger, 71, returned to the ship and have become much more sad. Its shares have largely fallen in value as costs rise and streaming stays on hold, eating away at revenues and profits.
A duo of nettle investor-activists at the moment are circling the company like vultures. Dan Loeb’s third point and Nelson Peltz’s Trian Partners differ from passive fund managers in that they use their ownership position to advocate for changes they consider will immediately drive up the share price, to hell with the current management.
They each have big stakes in Disney and, for starters, each want Iger to focus less on programming that appeals to AOC and more on things that appeal to Central America. They desire a consistent streaming strategy, cost cuts, and quite a bit more.
Peltz in particular should make Disney and Iger squirm. He preaches “constructive cooperation” with the firms he targets, but is a long-time critic of Iger and has a major share of $940 million value of stocks, which he’s more likely to increase as he prepares for war. Meanwhile, look what he did at GE: He fired CEO Jeff Immelt just two years after acquiring the stock because he believed Immelt couldn’t deliver on its performance and the stock collapsed.
Immelt’s successor left a few 12 months later for the same reason. The current leadership installed by Peltz is in the strategy of breaking up what was one among the largest conglomerates in US history.
OK, Peltz often gets his way and shouldn’t be known for his patience when his money is wasted, as was the case at GE. A boardroom battle for the ages is now certain as Peltz has demanded a seat on the board and Iger has him pounding in the sand. Iger is ready to up the ante, I’m told, by filing a preliminary power of attorney to elucidate why he believes Peltz is ineligible for the seat.
To date, Peltz says he doesn’t wish to pull GE on Disney and break it up, and Iger could stay CEO for the next two years. But based on his story, Peltz won’t go easy on himself if Disney’s stock doesn’t go up, and fast.
That might mean, in addition to every part else on Peltz’s wish list, shedding Disney’s so-called “noncore assets” to spice up profits. Bankers tell me that the sale of Disney’s sports cable network ESPN and possibly its entire ABC television network is on the table, and there may be an actual possibility of satisfying Peltz’s desire for the next share price.
Also, there’s definitely Iger’s work on the table if he doesn’t make his numbers.
DJ Solly’s last dance?
Never before has such a widely reported, fairly routine round of layoffs on Wall Street caused more uproar. But nothing seems to go quiet when it has David Solomon’s fingerprints throughout it.
Solomon, as indicated in this column, is the beleaguered CEO of Goldman Sachs. He’s a polarizing figure in the prestigious white shoe investment bank – and that goes beyond his internally controversial side job as a DJ during the Hamptons summer party scene.
A contingent of top partners want him removed, and so they may achieve their goal in the event that they can expose enough bad things to embarrass Goldman’s board of directors to make a change.
Just as Solomon was able to announce a low-draconian, roughly 6% slaughter of his staff (dubbed “David’s Demolition Day”), The Post’s Lydia Moynihan reported that Solomon callously ended Goldman’s free coffee.
Solomon will take greater than a couple of leaks, but these are symptoms of a weak management hand. And ultimately, they might be deadly in a spot like Goldman, with its “Game of Thrones” management upheavals.
Goldman culture is a relentless power struggle between traders and investment bankers. When one side controls the balance and the other is in power, change shouldn’t be far off.
Recall how trader Jon Corzine (future senator and governor of Latest Jersey) was replaced at the top after a banking coup led by top banker Hank Paulson (future secretary of the treasury). Traders Lloyd Blankfein and Gary Cohn displaced Paulson & Co. as trading profits skyrocketed; Solomon, a longtime banker, overtook Blankfein during the deal boom.
Solomon now finds himself in the middle of CEO Goldman’s dance amid higher trading revenues, a slowdown in transactions and the near-death of his foray into retail banking. For him, there are several ways out: Pray for more trades and fast (hard). Or finally discover a merger partner that I’m told has been waiting for use when the value of assets declines.
A correct merger (with Goldman as the official buyer) is more likely to keep Solomon in office so long as he wants.