Investor appetite for awakened corporatism has its limits, and usually begins with a decline in the stock price. For further proof, look at what happened at Disney.
Over the years, the Mouse House has been the epicenter of political correctness. Investors largely ignored this circus (including a same-sex kiss scene in children’s programming) as Disney’s stock soared.
Not anymore. After longtime CEO Bob Iger retired in 2020, his successor, Bob Chapek, proved less adept as a manager and wake-up salesman. Pandemic theme park closures didn’t help. Plus, he was crushed by Florida Governor Ron DeSantis for opposing a law barring sex education to 6-year-olds in schools, and Disney lost its special tax status.
Much of his programming was a dud, and his broadcast strategy failed. Disney’s stock plummeted so much that Chapek was shown the door after just two years on the job.
Iger, 71, returned to starboard and was more upset. Its shares have fallen largely as costs have risen and liquidity remains uncertain, eating into revenues and profits.
A duo of stingy activist investors are now circling the company like gluttons. Unlike passive fund managers, Dan Loeb’s Third Point and Nelson Peltz’s Trian Partners use their ownership positions to advocate for changes they believe will immediately lead to higher stock prices, current management be damned.
Both have large stakes in Disney, and for starters, both want Iger to focus less on programming that appeals to the AOC and more on Middle America. They want a consistent flow strategy, cost reduction and more.
Peltz, in particular, must make Disney and Iger jealous. He promotes “constructive engagement” with the companies he targets, but he is a longtime critic of Iger and has a significant $940 million stake in the stock, which he will add as he prepares for war. Meanwhile, look at what he did at GE: He defended CEO Jeff Immelt just two years after buying the stock because he believed Immelt couldn’t grow his numbers, and the stock sank.
Immelt’s successor went bye-bye about a year later for the same reason. The current management established by Peltz is in the process of breaking up one of the largest conglomerates in US history.
OK, Peltz often gets in his way and isn’t known for his patience when money goes down the drain, as was the case at GE. It’s a board fight for the ages where Peltz demands a wooden seat and Iger tells him to hit the sand. I am told that Iger is preparing to move forward, filing a preliminary affidavit to explain why he thinks Peltz does not deserve the seat.
So far, Peltz says he doesn’t want to pull a GE on Disney and break it up, and Iger could stay on as CEO for the next two years. But based on its history, Peltz won’t tolerate a stiff-arm acquisition unless Disney’s stock starts moving higher and faster.
That could mean divesting Disney’s so-called “non-core assets” to boost profits, in addition to everything else on Peltz’s wish list. Bankers tell me that sales of Disney’s sports cable network ESPN and possibly its entire ABC television network are on the table, a real opportunity to appease Pelts’ desire for a higher stock price.
If he doesn’t make his own numbers, Iger’s job is also most certainly on the table.
DJ Solly’s last dance?
Never before has a period of well-telegraphed, fairly regular layoffs caused a greater stir on Wall Street. But when David Solomon has his fingerprints on him, nothing goes smoothly.
Solomon, as this column notes, is the beleaguered CEO of Goldman Sachs. He’s a polarizing figure at the prestigious white-shoe investment bank — and that goes beyond his domestically controversial side hustle as a DJ on the summer Hamptons party scene.
A contingent of top partners wants him out, and if they can leak enough bad stuff to shame the Goldman board into making a change, they might get their way.
Just as Solomon was preparing to announce the unlikely audacious layoff of about 6% of his staff (dubbed “David’s Layoff Day”), The Post’s Lydia Moynihan reported that Solomon mistakenly ended Goldman’s free coffee giveaway.
It will take more than a few leaks for Solomon, but those are signs of a weak management hand. And they could eventually be as deadly as Goldman, with Game of Thrones management upheavals.
Goldman’s culture is one of a constant power struggle between traders and investment bankers. When one side controls the balance and the other is in power, change is not far off.
Remember how trader Jon Corzine (future New Jersey senator and governor) was replaced at the top after a bank coup led by leading banker Hank Paulson (future treasury secretary). When traders Lloyd Blankfein and Gary Cohn traded profits, Paulson & Co. Solomon, a longtime banker, prodded Blankfein during the deal boom.
Solomon now finds himself in the middle of the Goldman CEO dance amid higher trading revenues, a slowdown in deals and a collapse in his progress in retail banking. There are several ways out for him: pray for more deals and fast (hard). Or, finally, find a merger partner that I say is waiting to take over when the asset’s value declines.
The right merger (with Goldman being the official buyer) would likely keep Suleiman in business for as long as he wants.