Dividends and 3rd Point discloses stake of close to $1 billion in Disney, pushes for multiple changes

If you have ever read the history or some of the history of Disney, you will know over the years particularly after Walt Disney passed away, the stock in the company dropped and there was a fight to control the company. The new Board installed Michael Eisner and he helped turn around the company, ensure the company assets were productive and grew the company. It was a good story for the franchise and shareholders. The company over the years has gone through many changes and some things it does very well, however similar to all companies changes could be made.

For most of us, when we buy shares, we hope the company does well and over time if the shares do well we will continue to hold the shares. For some shareholders, their timeframes are shorter and when you add the control of greater assets, they tend to have more public influence. One would imagine, if you were investing close to $1 billion in the shares you would also have talked to senior management. If you were investing a few thousand, it may be possible to talk to senior management but likely it would be on conference call with other shareholders.

In an article by Svea Berbst-Bayliss and Dawn Chmielewski of Reuters, a hedge fund called Third Point which is run by Daniel Loeb has bought close to $1 billion in shares. Mr. Loeb and his hedge fund would like Disney to make some changes such as spinning off media assets (sell parts to the public), buyback shares, pay down debt and other ventures in order to increase the value of the shares. For the billion dollars in buying shares, Third Point owns 0.4% of the shares.

In early September, seeing the interest in ESPN, Mr. Loeb says Disney should keep the asset. Mr. Loeb on closer examination found that ESPN is a major asset for Disney.

Linking to dividend paying stocks, in every company shareholders come in for a reason and generally making money over the long term will keep most people contented, however there will always be some who believe more can be done. Sometimes the markets like more debt, sometimes less debt, sometimes the market likes companies to be streamlined, sometimes the markets like the companies to have significant fingers in many pies. In depends on the strategic plan and if the company is making money. If the company is making money and is profitable, many shareholders will be content to let management execute on their strategic plan. When they do not, everyone is a critic and as a shareholder must be listened to (think about sports fans – when the team is losing everyone has an opinion).

There are more questions than answers, till the next time – to raising questions.


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