The Happiest Place No More
Disney deals with a fresh activist threat, PLUS: Evergrande is going from bad to worse, and Texas has too many offices.
The Unhappiest Place
It can seem as though there are no good options for Disney these days. The entertainment giant has undergone some wild amounts of upheaval in the last two years, and has found itself to be in the crosshairs of people with particular political views (from both sides of the aisle). Recapping a few of the major pain points…
A never-ending political war with Florida governor Ron DeSantis
A nose-diving stock price
An eliminated dividend
Big misses on high-price attractions at its parks
Disney+ has basically done nothing but light cash on fire
Activist investors at the gates
Employee-relations problems relating to low pay at parks (Oh, did you hear about the executive who made $119,505 a day? Fun!)
And on, and on, and on
The list is, of course not exhaustive. For all these troubles, Disney shareholders have endured a more than 50% drop in the share price since the start of 2021.
At the start of the year, Nelson Peltz of Trian Partners made waves when he launched an activist campaign to get a board seat for himself at Disney. Long story short, he called off his campaign after once and current CEO Bob Iger assured him that there was a plan in place. At the time, Peltz said that he was essentially satisfied with the plan Disney had to turn things around.
Well, all that’s out the window now. Peltz is back and clamoring for multiple board seats this time. Safe to say he no longer has the warm-and-fuzzies about Disney’s plan to turn things around.
Disney brushed off Trian’s previous overtures for a board seat, saying in essence that the fund didn’t have the right experience to match with Disney. That’s not entirely wrong, but it’s kind of a weak argument. Disney’s house is more or less on fire, and it’s arguing whether or not Peltz has the right kind of water to put it out.
Honestly, Disney seems to be out of wrong moves here—something is bound to pay off, and Peltz, at least in the opening moves of this activist campaign, may be rewarded for taking some tactical patience this year. It seems difficult to imagine that shareholders would push back against him after Iger’s turnaround hasn’t seemed to generate any major payoff.
Stay tuned.
Falling Off A Cliff
I won’t pretend to know everything there is to know about Evergrande (a super-large land developer in China) or its slow-motion destruction, but it makes for some interesting reading. After the company defaulted on its bonds in 2021, things have just gone from bad to worse, but, interestingly, things haven’t seemed to ripple out beyond the Chinese economy (not to say that they couldn’t, of course).
What’s going to be most interesting to see, in my opinion, is whether or not investors will be able to seize assets from the company, or whether the government will do its normal thing and swoop in and stop that from happening. While the latter is most likely, there is precedent for non-Chinese investors to get claim to something—Oaktree famously took control of Evergrande properties in mainland China in 2022.
The outlook for recovery, however, seems pretty bleak according to the Wall Street Journal:
In a restructuring framework published in March, Evergrande said that if the deal doesn’t go ahead and the company goes into liquidation, investors are likely to make somewhere between 2 cents and 9 cents for every dollar of bonds they hold.
Other News
Howdy Y’all
The bloodbath in office real-estate comes to the Lone Star state: Houston, Dallas, and Austin top the list of U.S. cities with the highest office vacancy rates. This is surprising, but also not? These cities aren’t Zoomtowns (ain’t nobody moving to Houston to just enjoy the views and work remotely), and the state has seen record business relocation to its major cities. The likely culprit, however, is just good, old-fashioned capitalism in the form of massive over-building.
Final Thoughts…
Tesla’s cost-cutting strategy comes home to roost. Strangers are taking rich people’s cash out of China for them. Janet Yellen thinks the bond market is just fine. What slowdown: the economy may be overheating. Musk’s no-moderation moderation policy on X isn’t helping things in the Israel-Hamas conflict. 49ers quarterback Brock Purdy is a pretty frugal guy.