New Investor Could be a Major Distraction for Disney

in Entertainment


Credit: Disney

According to sources, the Walt Disney Company senior management team could face unnecessary distractions as the board of directors, and executive suite fends off activist investors.

Credit: Disney

In August 2022, multiple reports surfaced that Hedge Fund Manager, Dan Loeb, bought a new stake in The Walt Disney Company’s stock and pushed senior management to spinoff the company’s ESPN division. In a letter published by the hedge fund manager, Mr. Loeb made his case publicly that it was in the firm’s shareholders’ best interest that management should spin off ESPN.

In a letter to Walt Disney Company CEO Bob Chapek, Loeb stated, “ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting.” He also said, “We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.”

Loeb advocated for an ESPN spinoff and urged the entertainment firm to integrate the Hulu streaming service directly into the Disney+ direct-to-consumer platform. After receiving Mr. Loeb’s letter, The Walt Disney Company’s management team responded to his requests by saying the company has seen continuous growth across businesses.

Last month, it appeared that Mr. Loeb would step back from his request to sell or spin off ESPN after Bob Chapek “vowed to restore the business to its one-time status as a growth engine of the company,” according to Christopher Grimes of the Financial Times.

As The Walt Disney Company continues to face multiple headwinds on several fronts, the last thing management needs are to face external distractions from activist hedge fund investors who may not fully understand the business.

What are your thoughts on Mr. Loeb’s involvement with Disney? We would love to hear your opinion.

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