How Iger beat Peltz
It’s over. Disney defended activist investor Nelson Peltz for the second time in two years, as his shareholders rejected his attempt to win two seats on its board of directors.
The Mouse House claimed a “substantial” margin of victory after a bitter contest with Peltz and his main backer, former Marvel president Ike Perlmutter. According to preliminary results from Wednesday’s annual investor meeting, Disney’s board candidates won the support of 75 percent of individual shareholders, a huge investor base.
But like any good Disney story, the fight with the board of directors provided a number of lessons for the future, for both companies and activists.
A solid defense is important. Executives, led by Disney CEO Bob Iger, laid out a series of bold initiatives last fall, in part to blunt Peltz’s calls for change, according to The Wall Street Journal. That included cost-cutting efforts, an investment in video game giant Epic Games and a restructuring of the struggling movie division.
It helps that Disney’s stock is up 20 percent in the past year, downplaying Peltz’s argument that the company needed help. (His biggest wins came at companies like Procter & Gamble, where stock prices languished.) That almost certainly mattered a lot to big investors like BlackRock and Vanguard, who sided with Disney.
The new proxy voting rules changed the dynamics of the fight. For years, company shareholders were asked to choose between two slates of board candidates proposed by the companies or by activist investors. But a new SEC rule allows shareholders to more easily vote for a mix of candidates from both sides.
Parties involved in this battle told DealBook that because each side was fighting specific individuals, rather than an entire group, the attacks became more personal. (That said, there’s no love lost between Perlmutter and Iger.) The new system also allowed another activist investor in Disney stock, Blackwells Capital, to campaign against Peltz, dividing the opposition.
CEO succession planning is important. One of Peltz’s biggest criticisms of Iger was his failure over the years to adequately identify and prepare his replacement, as demonstrated by Bob Chapek’s aborted tenure. That issue was cited by proxy advisory firm Institutional Shareholder Services, which recommended a vote in Peltz. And State Street, one of Disney’s three largest shareholders, voted against the reelection of Mark Parker, who heads the company’s succession planning committee.
Analysts and industry observers expect Disney to redouble its efforts to address the succession before 2026, when Iger’s current (and according to him final) contract expires. Disney’s internal candidates such as television chief Dana Walden, theme parks leader Josh D’Amaro and ESPN chief Jimmy Pitaro have taken on more prominent assignments in recent months.
THIS IS WHAT’S HAPPENING
Janet Yellen defends protecting American industries from China. The Treasury secretary suggested overnight that the Biden administration would defend emerging sectors such as clean energy against Chinese overcapacity, an issue she is expected to take up with her counterparts in Beijing. This comes after President Biden addressed unfair trade practices with Chinese leader Xi Jinping earlier this week.
Paramount rejects $26 billion offer from Apollo. Last weekend’s approach to the entire media company, which represents an expansion of Apollo’s $11 billion bid for Paramount’s movie studio alone, was ignored, The Times reports. Paramount executives were focused on advancing negotiations with another offer, that of Skydance, and preferred a bird in hand.
Google is reportedly considering charging for AI-powered search features. The tech giant is considering making advanced capabilities based on its Gemini artificial intelligence model available only to subscribers of its premium services, according to The Financial Times. It would be the first time Google charges for anything related to its core search business.
Apple is said to be exploring home robots as its next big product. The iPhone maker is investigating the potential of personal robots and a robot-powered display as future revenue streams, although the work is early and they may not become full-fledged products, Bloomberg reports. Apple is looking for blockbuster products, after abandoning its electric vehicle project and possibly waiting years for its Vision Pro to go mainstream.
A cheat sheet for tomorrow’s jobs report
Investors on Thursday still largely believe the Federal Reserve will begin cutting interest rates in June.
It’s a gamble that central bank officials themselves won’t make: Jay Powell, chair of the Federal Reserve, reiterated Wednesday that he is waiting for more evidence that inflation is slowing before starting to reduce borrowing costs.
Two important reports will arrive in the next few days, starting with tomorrow’s nonfarm payrolls report. This is what you should look at.
Economists expect employers to have created at least 200,000 jobs last month, according to a Bloomberg survey. It would be a significant drop from the 275,000 jobs created in February, but it would still indicate a strong labor market. “Our economy has had a labor shortage, and probably still does,” Powell said Wednesday.
His claim was underlined by data from payroll processor ADP that showed an increase in hiring, especially in the construction, leisure and hospitality sectors. Following the ADP report, Goldman Sachs economists raised their forecast for tomorrow’s nonfarm payrolls figure to 240,000, from 215,000.
Look at immigration. While it is a hot political issue, it is also a focus of attention for economists. Foreign-born workers have become a surprising part of the job growth story (and may explain why the unemployment rate has declined). above despite strong hiring numbers).
Strong immigration has also been a major factor in the United States’ economic recovery from the coronavirus pandemic.
Wage growth will be of particular interest. There are signs that workers’ pay increases have begun to slow over the past year, as inflation slowed. Wall Street is on alert for any signs that wages are rising, which could force the Federal Reserve to recalibrate its rate cut schedule.
Here is the worst case scenario for investors, According to economists at Bank of America: “Employment growth of more than 250,000 jobs, stronger-than-expected wage growth and a drop in the unemployment rate would likely further negate the possibility of a cut in June,” they wrote in a note. research this week. .
Shorting Trump has been a bad bet
Donald Trump’s social media company lost more than 30 percent last week in highly volatile trading. Despite that swoon, investors shorting Trump Media & Technology Group are losing big.
The bitter trade is complicated by the fact that major asset managers have largely stayed away from stocks, leaving “shorts” scrimping to get their hands on a relatively small set of shares to buy and pay dearly for.
Trump Media is one of the most “shorted” stocks in the US, and one of the most expensive, according to S3 Partners, a financial data company. Last month, traders racked up $126 million in losses betting against Trump Media, the company said. (Short sellers essentially borrow shares of a target company and sell them, hoping to buy them back at a lower price that ensures a profit.)
There are a few reasons for investors to short the stock: Trump Media reported this week that it had lost $58 million last year on sales of about $4 million, and that an independent auditor had expressed “substantial doubts” about its financial viability before it began trading last year. week.
Many of the shorts are betting on an increase in Trump Media guarantees, which would give holders the right to new shares of the company at a fixed price. The bet: regulators would have to give the company the green light to issue new shares.
Investors seem unfazed by such uncertainty. “There are still a lot of people looking to shorten the name,” Ihor Dusaniwsky, CEO of S3 Partners, told The Times.
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Elsewhere in Trump Media news: Two brothers accused of masterminding a $23 million insider trading scheme involving the company in its pre-IPO days pleaded guilty to the charges on Wednesday. Each of them faces prison sentences of up to 20 years.
The open and shut case of AI
Of all the debates in AI circles, one of the most important comes down to access: Should companies make their technology available to anyone to see, change, and use (an approach known as open source)?
The White House, as part of its efforts to create new rules to govern AI, is wading into the debate. On Wednesday, he posted more than 300 comments he collected about the risks of open source AI. The comments fall into two main categories:
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open source AI It is fairer and safer. Meta, one of the biggest proponents of this approach, wrote that it “leads to better, safer products, faster innovation, and a larger market.” Startup incubator Y Combinator said such models “may have greater potential for misuse, but also allow for democratic input and oversight.” And Andreessen Horowitz, the Silicon Valley venture capital firm that has invested in dozens of AI startups, opposed any policies that would inhibit the development of open AI models. The rationale behind it: that open source software has become the “foundation of the Internet.”
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It’s better to be careful. Some of the biggest names in commercial AI, which will benefit from keeping their technology proprietary, say having tighter control of advanced systems protects against what OpenAI called “the operations of a range of nation-state cyber threat actors.” ”. Google wrote that “open” and “closed” sources lie on a spectrum, and that it is best to talk about “different degrees of access to different components of a given system.”
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Offers
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Tottenham Hotspur, the English soccer club, says it is in talks with potential investors about selling a stake as team valuations soar. (FOOT)
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Patrick Whitesell, co-founder of entertainment conglomerate Endeavor, is creating a new media company with $250 million backed by investment firm Silver Lake. (Hollywood reporter)
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Rock band Kiss will sell its song catalog and the rights to its image and name to Pophouse, the entertainment company behind ABBA’s avatar concert concept, reportedly for $300 million. (Bloomberg)
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