1 00:00:00,000 --> 00:00:02,400 Welcome back everyone. We have a little bit of a drama 2 00:00:02,400 --> 00:00:04,900 alert. Remember, just last week, 3 00:00:04,900 --> 00:00:09,600 someone named Nelson Peltz, an activist investor took a steak 4 00:00:09,600 --> 00:00:13,500 and Disney and then he released this big slide deck 5 00:00:13,500 --> 00:00:16,200 presentation. Now, I went through the entire 6 00:00:16,200 --> 00:00:19,700 thing, the slide deck presentation was a scathing 7 00:00:19,700 --> 00:00:22,700 rebuke of Disney's management. It went through detail. 8 00:00:22,700 --> 00:00:27,500 After detail of where Disney has has really just gone wrong and 9 00:00:27,500 --> 00:00:31,600 it has so much data in it. It's an extensive study on 10 00:00:31,600 --> 00:00:33,100 Disney. I think it's a great piece of 11 00:00:33,100 --> 00:00:35,300 research. And we went over the entire 12 00:00:35,300 --> 00:00:38,700 thing that slide deck presentation painted, a very 13 00:00:38,700 --> 00:00:42,000 negative outlook for Disney. A lot of people in the comments 14 00:00:42,000 --> 00:00:44,700 said, wow, I don't even know if I want to hold Disney stock 15 00:00:44,700 --> 00:00:47,200 after reading that. Well, we have an update, Disney 16 00:00:47,200 --> 00:00:49,100 has officially responded to the Nelson. 17 00:00:49,100 --> 00:00:55,000 Peltz, accusations and Analysis and it is a spicy response. 18 00:00:55,000 --> 00:00:58,000 I can tell that Disney viewed this as a little bit of a mic 19 00:00:58,000 --> 00:01:01,300 drop moment, where they're they're Punching back hard. 20 00:01:01,500 --> 00:01:03,300 Now, they did this in an SEC filing. 21 00:01:03,300 --> 00:01:05,800 It's called the current Disney board is a right for the 22 00:01:05,800 --> 00:01:09,500 shareholders January. 17th 2023. That is today. 23 00:01:09,600 --> 00:01:11,500 So we're going to go through this presentation will look at 24 00:01:11,500 --> 00:01:14,000 Disney's response. I'll go through Page by Page and 25 00:01:14,000 --> 00:01:16,500 tell you where I think Disney has it, right? 26 00:01:16,500 --> 00:01:19,300 And where I think they're making valid claims, as well as where I 27 00:01:19,308 --> 00:01:21,700 think they're dead wrong, because Disney says, a lot of 28 00:01:21,700 --> 00:01:24,900 things that I think are frankly, laughable in this presentation. 29 00:01:24,900 --> 00:01:26,100 So, let's go ahead and Jump Right In. 30 00:01:26,100 --> 00:01:29,800 We have the first slide here. The current board is the right. 31 00:01:29,900 --> 00:01:32,400 And for Disney shareholders, why did they start with this? 32 00:01:32,700 --> 00:01:35,900 Well, the board obviously took this personal because Nelson 33 00:01:35,900 --> 00:01:39,200 Peltz, his big criticism is basically the board doesn't know 34 00:01:39,208 --> 00:01:41,500 what they're doing. They're doing a poor job. 35 00:01:41,800 --> 00:01:44,400 They're not getting returns for the shareholders while they're 36 00:01:44,400 --> 00:01:47,200 simultaneously rewarding themselves with excessive 37 00:01:47,200 --> 00:01:49,800 compensation. That was a lot of the criticism 38 00:01:49,800 --> 00:01:52,500 which I agree with I think Nelson Peltz in his 39 00:01:52,500 --> 00:01:55,300 presentation. Highlighted a lot of very valid 40 00:01:55,300 --> 00:01:57,300 criticisms Buzz. Go ahead and look at the 41 00:01:57,300 --> 00:01:59,800 response here. They say independent highly. 42 00:02:00,000 --> 00:02:03,100 Qualified board has provided strong oversight focused on 43 00:02:03,100 --> 00:02:06,000 delivering Superior. Sustained shareholder value. 44 00:02:06,800 --> 00:02:09,800 Lots of Buzz words they're highly qualified. 45 00:02:09,900 --> 00:02:13,500 Delivering Superior sustained, shareholder value, lots of 46 00:02:13,500 --> 00:02:14,900 words. What I want to get to is the 47 00:02:14,900 --> 00:02:18,400 actual data, they say, Disney board, regularly reviews, and is 48 00:02:18,400 --> 00:02:21,400 heavily involved in setting the Strategic direction of the 49 00:02:21,400 --> 00:02:23,500 company. Okay. 50 00:02:23,800 --> 00:02:26,400 Definitely navigated the pandemic and oversaw launch to 51 00:02:26,400 --> 00:02:30,400 direct-to-consumer platforms and pivoted from startup phase to 52 00:02:30,400 --> 00:02:34,200 focus on profitability. They acted decisively to address 53 00:02:34,200 --> 00:02:36,500 leadership challenge as it emerge. 54 00:02:36,900 --> 00:02:40,400 Isn't this an interesting way to phrase this Disney staying here? 55 00:02:40,800 --> 00:02:43,100 Look, we had this this leadership challenge and we 56 00:02:43,100 --> 00:02:46,100 acted super decisively to fix the problem. 57 00:02:46,500 --> 00:02:50,500 Okay, the problem was Disney that you put Bob capex, someone 58 00:02:50,500 --> 00:02:54,400 who had no experience in In media in front of the biggest 59 00:02:54,400 --> 00:02:57,900 media company in the world is CEO and then you, you stated 60 00:02:57,900 --> 00:02:59,900 that, you had full confidence in him. 61 00:03:00,200 --> 00:03:04,800 Only six months before, firing him in the dead of night, that's 62 00:03:04,800 --> 00:03:08,100 you addressing the leadership challenge, you created The 63 00:03:08,100 --> 00:03:11,000 Challenge, Disney's, the one that actually caused this 64 00:03:11,000 --> 00:03:13,800 challenge, it wasn't thrust upon them, they created it out of 65 00:03:13,800 --> 00:03:16,200 thin air because they didn't have any type of succession 66 00:03:16,200 --> 00:03:18,400 plan. So Disney's version of saying 67 00:03:18,700 --> 00:03:22,200 that we're addressing challenges is we're creating big problems. 68 00:03:22,600 --> 00:03:25,400 Then we're trying to fix the big problems that we just previously 69 00:03:25,400 --> 00:03:27,000 created. That's Disney addressing 70 00:03:27,000 --> 00:03:29,200 challenges. Anyways, they go over right 71 00:03:29,200 --> 00:03:32,300 here, the new people, they hired and their experience and all 72 00:03:32,300 --> 00:03:34,500 their credentials. One of them that worked at Nike, 73 00:03:34,900 --> 00:03:36,200 right? And they try to list how great 74 00:03:36,200 --> 00:03:38,000 they are. And then what Disney does here 75 00:03:38,000 --> 00:03:41,300 is the outline, basically the four different things that 76 00:03:41,300 --> 00:03:44,000 they're working on right now. And again, these are just words, 77 00:03:44,000 --> 00:03:47,100 they don't have any real data or anything specific, but they 78 00:03:47,100 --> 00:03:49,400 basically say that they're reorganizing the leadership 79 00:03:49,400 --> 00:03:51,100 structure. They're trying to become more 80 00:03:51,100 --> 00:03:53,900 cost efficient and streamlined. Aligning their operations, 81 00:03:54,100 --> 00:03:58,400 they're prioritizing streaming profitability, you know, in 82 00:03:58,400 --> 00:04:00,700 addition to subscriber growth. But the big focus is on 83 00:04:00,700 --> 00:04:03,800 profitability and they're improving the guest experience 84 00:04:03,800 --> 00:04:06,200 by providing more value and flexibility. 85 00:04:06,700 --> 00:04:10,900 So again nice platitudes nice words but there's no actual 86 00:04:10,900 --> 00:04:13,700 specifics and any of this. Now in this next section, Disney 87 00:04:13,700 --> 00:04:16,899 tries to highlight the differences between Nelson Peltz 88 00:04:17,200 --> 00:04:19,600 and their own leadership team and they basically say that 89 00:04:19,600 --> 00:04:21,500 Nelson Peltz has no clue what he's doing. 90 00:04:21,500 --> 00:04:25,100 He's just some Investor that has no experience Nelson. 91 00:04:25,100 --> 00:04:28,400 Peltz does not understand Disney's business and lacks the 92 00:04:28,400 --> 00:04:31,400 skills and experience to assist the board and delivering 93 00:04:31,600 --> 00:04:35,800 shareholder value in a rapidly shifting media ecosystem. 94 00:04:36,200 --> 00:04:38,000 Okay? So Nelson Peltz has no clue what 95 00:04:38,000 --> 00:04:41,100 he's talking about but our people, they have experience 96 00:04:41,100 --> 00:04:42,200 they know what they're talking about. 97 00:04:42,200 --> 00:04:44,700 That's the message here. Bob Iger, the current CEO of 98 00:04:44,707 --> 00:04:48,600 Disney has created significant value for Disney shareholders as 99 00:04:48,600 --> 00:04:52,000 CEO and they highlight the time during his tenure. 100 00:04:52,500 --> 00:04:55,300 And Disney tries to paint it. Like, Bob Iger has done 101 00:04:55,300 --> 00:05:01,400 fantastic as CEO because since 2005, when he started to 2020, 102 00:05:01,600 --> 00:05:03,800 they have five hundred fifty four percent returns here, you 103 00:05:03,800 --> 00:05:06,600 can see the chart right there. Five hundred fifty four percent 104 00:05:06,700 --> 00:05:09,400 while the S&P 500 has two hundred and forty four percent. 105 00:05:09,700 --> 00:05:13,000 So Disney outperform the index over that time period. 106 00:05:13,200 --> 00:05:15,400 But here's what Disney conveniently leaves out. 107 00:05:15,400 --> 00:05:20,100 What this comparison Bob Iger left Disney literally right 108 00:05:20,100 --> 00:05:22,300 before covid. Like right as covid-19. 109 00:05:22,500 --> 00:05:24,600 Starting, that's when he's like I'm bailing. 110 00:05:24,900 --> 00:05:28,200 So basically Bob iger's seeing the the iceberg and he's on the 111 00:05:28,200 --> 00:05:30,600 Titanic, and he's like, there's a big Iceberg there. 112 00:05:30,800 --> 00:05:33,400 You know what I'm retiring? I'm going to just retire right 113 00:05:33,400 --> 00:05:34,700 now. There's an iceberg coming. 114 00:05:34,900 --> 00:05:37,600 So he jumps off the ship, right? Is this ship is sinking. 115 00:05:37,600 --> 00:05:41,700 So Bob Iger bails out right here and then Disney stock price gets 116 00:05:41,700 --> 00:05:43,900 completely crushed because of covid. 117 00:05:43,900 --> 00:05:47,000 And the big point that Nelson Peltz made with his criticism is 118 00:05:47,000 --> 00:05:48,900 that Bob Iger, never really left. 119 00:05:49,200 --> 00:05:52,400 He was still the chairman, he was still involved in the day. 120 00:05:52,400 --> 00:05:55,400 A two-day of Disney. So I find it very convenient and 121 00:05:55,400 --> 00:05:57,700 misleading. That Disney says that Bob Iger 122 00:05:57,700 --> 00:05:59,200 was done with the company right here. 123 00:05:59,500 --> 00:06:02,000 When Bob Iger, is the one that put into place. 124 00:06:02,100 --> 00:06:05,400 All of these plans, he's the one that bought the fox asset. 125 00:06:05,500 --> 00:06:07,900 He's the one that put in, place the streaming services. 126 00:06:08,200 --> 00:06:10,700 He should own the performance of the stock after this. 127 00:06:10,700 --> 00:06:14,600 Not Bob capek, they threw it to Bob capek right before, covid 128 00:06:14,600 --> 00:06:16,700 happen. And then, even after that, Bob 129 00:06:16,700 --> 00:06:20,200 Iger was still in control saying that he was helping get the 130 00:06:20,200 --> 00:06:23,200 company through the tough times of And if we look at the 131 00:06:23,200 --> 00:06:27,500 performance that doesn't end right before 2020, the stock 132 00:06:27,500 --> 00:06:30,700 price crumbled, all those excess gains went away. 133 00:06:31,000 --> 00:06:35,300 And Disney is now, well, below the S&P 500 since the beginning 134 00:06:35,300 --> 00:06:38,300 of Bob, iger's, tenure, I think them cutting off their 135 00:06:38,300 --> 00:06:41,200 performance right before he steps out, even though he still 136 00:06:41,200 --> 00:06:44,300 the chairman and largely influencing the company is 137 00:06:44,300 --> 00:06:46,600 highly misleading. So this is Disney's idea of 138 00:06:46,600 --> 00:06:50,900 measuring success basically just stop the stock chart as soon as 139 00:06:50,907 --> 00:06:52,300 the company's stock price starts to go. 140 00:06:52,400 --> 00:06:53,900 Down. And then talk about how good 141 00:06:53,900 --> 00:06:56,800 your performance was before then and then compared to other 142 00:06:56,800 --> 00:06:58,800 companies. Again with the same timeline, 143 00:06:59,100 --> 00:07:03,400 Disney did great if you stop the stock price right before covid. 144 00:07:03,400 --> 00:07:06,900 If you erase the past three years, of course they did good. 145 00:07:06,900 --> 00:07:09,300 All the challenges happened after covid. 146 00:07:09,300 --> 00:07:12,400 Once they really started to dive into streaming, that's when they 147 00:07:12,400 --> 00:07:14,200 started to underperform all of their peers. 148 00:07:14,500 --> 00:07:17,200 So all of this is just it's nonsense. 149 00:07:17,200 --> 00:07:19,800 They're not even comparing the total time line of the company. 150 00:07:20,100 --> 00:07:22,700 Now, moving on, they highlight the achievements of Baba is Or 151 00:07:23,100 --> 00:07:26,500 during his CEO position. And again this is the incredibly 152 00:07:26,800 --> 00:07:30,400 I think convenient and misleading timeline of Bob, 153 00:07:30,400 --> 00:07:34,100 iger's CEO position. He left the CEO position, 154 00:07:34,200 --> 00:07:38,400 February 25th of 20, 20 days before the pandemic hit. 155 00:07:38,600 --> 00:07:42,400 So Disneys, conveniently honing in on Bob, iger's, tenure as 156 00:07:42,400 --> 00:07:45,100 CEO. When Bob Iger really never left 157 00:07:45,100 --> 00:07:46,900 at all. He was the executive chairman 158 00:07:47,100 --> 00:07:49,900 and he was still doing day-to-day work at Disney. 159 00:07:50,000 --> 00:07:52,900 He was still involved in the company, so I think That this is 160 00:07:52,900 --> 00:07:56,100 incredibly misleading to focus in on this timeline. 161 00:07:56,100 --> 00:07:58,800 Now, they mentioned that the market cap 5x under his 162 00:07:58,800 --> 00:08:00,800 leadership. I think that's great. 163 00:08:00,800 --> 00:08:03,700 He grew the company, but I also would be careful. 164 00:08:03,900 --> 00:08:06,600 A lot of investors, don't realize that market caps of 165 00:08:06,600 --> 00:08:10,000 companies can grow without the investor getting returns from 166 00:08:10,000 --> 00:08:11,900 it. For example, if a company grows 167 00:08:11,900 --> 00:08:15,200 the market cap by double by buying another company through a 168 00:08:15,207 --> 00:08:18,500 highly dilute of acquisition, that'll grow the market cap of 169 00:08:18,500 --> 00:08:21,900 the company, but the investors since their diluted, they own a 170 00:08:21,900 --> 00:08:24,600 smaller Senator of the bigger company, they actually didn't 171 00:08:24,600 --> 00:08:27,800 get any returns. So I wouldn't just think that 172 00:08:27,800 --> 00:08:31,100 growing a market cap is the end goal, because a lot of times 173 00:08:31,100 --> 00:08:34,600 that doesn't highly correlated with returns long term, track 174 00:08:34,600 --> 00:08:37,600 record of value, enhancing merger and acquisition deals. 175 00:08:37,700 --> 00:08:40,700 This I agree with Pixar Marvel. Lucasfilm, I think we're 176 00:08:40,700 --> 00:08:44,300 fantastic Acquisitions. I'm very on the fence about the 177 00:08:44,300 --> 00:08:47,600 21st Century, Fox deal. I don't personally right now 178 00:08:47,600 --> 00:08:49,600 think that was a good acquisition and then they 179 00:08:49,600 --> 00:08:51,700 highlight all the capital, they're returning to 180 00:08:51,700 --> 00:08:54,900 shareholders. 89 billion dollars of capital return to 181 00:08:54,900 --> 00:08:58,600 shareholders. 66 of it through share BuyBacks and twenty three 182 00:08:58,600 --> 00:09:00,600 billion through dividends and they show year by year. 183 00:09:00,800 --> 00:09:03,200 The billions of dollars are returning to shareholders. 184 00:09:03,500 --> 00:09:06,200 This can also be highly misleading because a lot of 185 00:09:06,200 --> 00:09:09,300 times what companies do is they highlight how many BuyBacks 186 00:09:09,300 --> 00:09:12,300 they're doing, but they don't highlight how much dilution 187 00:09:12,300 --> 00:09:14,200 they're doing. For example, we can look at 188 00:09:14,200 --> 00:09:17,200 Disney on quatrain sites and this tool is available to all 189 00:09:17,200 --> 00:09:19,300 Patron members. You can try it out with the link 190 00:09:19,300 --> 00:09:21,700 in the description below, but we can bring up the shares 191 00:09:21,700 --> 00:09:23,700 outstanding. This shows whether or not 192 00:09:23,700 --> 00:09:26,100 they're really returning Capital back to the shareholder. 193 00:09:26,100 --> 00:09:30,300 And what we see is that right here is when it started 2006. 194 00:09:30,300 --> 00:09:35,000 This is Bob, iger's tenure. So, he did start doing BuyBacks 195 00:09:35,000 --> 00:09:38,200 and the company was reducing the shares outstanding for years 196 00:09:38,200 --> 00:09:40,000 returning, Capital back to the shareholders. 197 00:09:40,000 --> 00:09:44,300 But then what did they do? They purchased 21st Century Fox 198 00:09:44,300 --> 00:09:47,700 and they also not only diluted the shareholder, but they added 199 00:09:47,700 --> 00:09:50,900 on a bunch of debt that brings you right back to where the 200 00:09:50,900 --> 00:09:52,900 company was at. And 10. 201 00:09:53,000 --> 00:09:55,600 So really Disney hasn't Shrunk the share count at all. 202 00:09:55,600 --> 00:09:58,500 Since 2010, the company has the same amount of shares 203 00:09:58,500 --> 00:10:01,400 outstanding and even more recently, the share count is 204 00:10:01,400 --> 00:10:03,800 going up. It's on a steady Trend upwards 205 00:10:04,100 --> 00:10:06,300 and the dividend has been scrapped. 206 00:10:06,400 --> 00:10:10,100 So since 2020, they haven't returned any Capital either 207 00:10:10,100 --> 00:10:13,400 through BuyBacks or dividends to the shareholders zilch. 208 00:10:13,400 --> 00:10:15,400 But again, what they're doing here is they're highlighting 209 00:10:15,400 --> 00:10:18,600 only during Bob iger's tenure pretending like he wasn't 210 00:10:18,600 --> 00:10:22,300 involved in the company at all from 2020 to 2025. 211 00:10:22,400 --> 00:10:24,400 Three. Now, again, this whole premise, 212 00:10:24,400 --> 00:10:27,300 everything Disney's doing where they're honing in on, just the 213 00:10:27,300 --> 00:10:31,300 timeline right before 2020. Is so disingenuous, it's so 214 00:10:31,300 --> 00:10:35,600 dishonest because during that time period, two years ago, Bob 215 00:10:35,600 --> 00:10:39,000 Iger Wanted full credit for running the company through 216 00:10:39,000 --> 00:10:41,600 covid. Disney's Bob Iger stays on to 217 00:10:41,600 --> 00:10:44,600 steer the company during the covid-19 crisis. 218 00:10:44,600 --> 00:10:47,000 He actually went on to a New York Times interview to take 219 00:10:47,000 --> 00:10:50,400 full credit of navigating the company through the covid 220 00:10:50,400 --> 00:10:52,500 crisis. Quote, a crisis of This 221 00:10:52,500 --> 00:10:55,800 magnitude and its impact on Disney would necessarily result 222 00:10:55,800 --> 00:10:59,200 in me actively helping Bob, and the company contend with it. 223 00:10:59,300 --> 00:11:03,400 I agree told the New York Times, this was March of 2020. 224 00:11:03,400 --> 00:11:06,500 So during covid, Bob Iger was saying that he was in control 225 00:11:06,500 --> 00:11:09,300 steering, the company, taking credit for it, in the New York 226 00:11:09,300 --> 00:11:11,200 Times. And then, in this presentation, 227 00:11:11,200 --> 00:11:13,500 they just leave that out. This had nothing to do with Bob. 228 00:11:13,500 --> 00:11:16,000 Iger, this is all Bob capex fault. 229 00:11:16,100 --> 00:11:19,100 I think that's very disingenuous and misleading from Disney. 230 00:11:19,300 --> 00:11:21,800 Now they go on to highlight all the amazing deals at Bob Iger 231 00:11:21,800 --> 00:11:24,000 did And credit where credit is due. 232 00:11:24,300 --> 00:11:27,300 These are amazing deals. Baba hiker did an incredible 233 00:11:27,300 --> 00:11:31,000 spree of Acquisitions. He purchased Pixar, Marvel, 234 00:11:31,000 --> 00:11:35,000 lucasfilm, and these companies that he purchased, they printed 235 00:11:35,000 --> 00:11:37,500 money above the cost of purchase. 236 00:11:37,500 --> 00:11:41,400 So he does have a lot to back up his tenure, in terms of his 237 00:11:41,400 --> 00:11:43,100 Acquisitions. I think that's a very strong 238 00:11:43,100 --> 00:11:45,800 point in his history. I would highlight that too, and 239 00:11:45,800 --> 00:11:47,600 I don't think there's anything dishonest with this part of the 240 00:11:47,600 --> 00:11:49,400 presentation. I think that this should be 241 00:11:49,500 --> 00:11:51,300 something Disney response with now. 242 00:11:51,300 --> 00:11:55,200 Moving on, to the new Deal the fox transaction they say it was 243 00:11:55,200 --> 00:11:58,100 critical to better position. Disney to address key secular 244 00:11:58,100 --> 00:12:01,400 shifts in the media sector. This is where I'm unsure about 245 00:12:01,400 --> 00:12:03,500 this deal. I don't know about the fox deal. 246 00:12:03,800 --> 00:12:07,200 They say that it broadened their portfolio of world-class IP 247 00:12:07,500 --> 00:12:10,300 significantly enhanced our content output capacity. 248 00:12:10,700 --> 00:12:14,200 Enabled acceleration of global direct-to-consumer expansion 249 00:12:14,400 --> 00:12:17,300 ahead of peers, provide a deep bench of experience proven 250 00:12:17,300 --> 00:12:19,200 management. They go through all the managers 251 00:12:19,200 --> 00:12:22,200 there provided new avenues for growth and attractive. 252 00:12:22,400 --> 00:12:25,600 Small regions so they have their thesis there, they can bring up 253 00:12:25,600 --> 00:12:28,400 a lot of points for it. And they say, what tree on which 254 00:12:28,400 --> 00:12:31,600 is Nelson. Peltz is missing, is the deal. 255 00:12:31,600 --> 00:12:34,600 Facilitated the acceleration of our strategic shift a 256 00:12:34,608 --> 00:12:37,400 direct-to-consumer, that's where I don't really agree with 257 00:12:37,400 --> 00:12:39,000 Disney. I don't think this really 258 00:12:39,000 --> 00:12:41,900 accelerated. Anything the acceleration was 259 00:12:41,900 --> 00:12:45,100 happening with Mandalorian that first season of Mandalorian. 260 00:12:45,100 --> 00:12:48,900 Got 10 million people signed up the first day and there are all 261 00:12:49,000 --> 00:12:52,100 excited about the next episode, Disney's unique. 262 00:12:52,300 --> 00:12:56,300 Incredible IP as what God people signed up for Disney plus the 263 00:12:56,300 --> 00:12:58,200 fox deal. I don't think played a pivotal 264 00:12:58,200 --> 00:13:01,200 role in that having The Simpsons on Disney plus. 265 00:13:01,500 --> 00:13:03,600 I don't think was the big selling point and then they 266 00:13:03,600 --> 00:13:07,600 asked Nelson Peltz would Tree on have preferred that a competitor 267 00:13:07,600 --> 00:13:11,900 own, the fox asset and honestly, as a shareholder it's a toss-up 268 00:13:11,900 --> 00:13:15,200 I don't really know if it's worth it to own the fox asset. 269 00:13:15,200 --> 00:13:16,900 When it does this to your share count. 270 00:13:17,100 --> 00:13:19,400 It really has to make up a huge difference. 271 00:13:19,600 --> 00:13:23,300 They took on so much dilution, they To the shareholder to take 272 00:13:23,300 --> 00:13:25,000 on the fox asset. And then, on top of the 273 00:13:25,000 --> 00:13:27,800 dilution, they also took on a ton of debt, the debt spiked up 274 00:13:27,800 --> 00:13:31,100 like crazy, two levels, Disney has never seen in its history. 275 00:13:31,100 --> 00:13:34,200 The key assets that the fox deal brought Disney was The Simpsons 276 00:13:34,200 --> 00:13:37,800 family guy, modern family, all great, but I don't think these 277 00:13:37,800 --> 00:13:42,900 are groundbreaking Landmark pieces of assets like Pixar or 278 00:13:42,900 --> 00:13:45,100 Marvel. I don't know that you can you 279 00:13:45,100 --> 00:13:47,300 can really do the same with the Simpsons. 280 00:13:47,300 --> 00:13:51,900 It's been running for 740 episodes we have Deadpool. 281 00:13:52,300 --> 00:13:56,500 Again, these are great, Fantastic Four, good assets but 282 00:13:56,500 --> 00:13:59,000 I don't think that Disney really needed them especially for the 283 00:13:59,000 --> 00:14:01,700 very high price that they paid. And then they say that his 284 00:14:01,800 --> 00:14:04,900 transaction analysis is fundamentally flawed and that 285 00:14:04,900 --> 00:14:08,100 they do have synergies, the relying heavily on synergies to 286 00:14:08,100 --> 00:14:11,700 make this work estimated two billion dollars of synergies at 287 00:14:11,700 --> 00:14:13,900 the announcement and then they point out that the multiple that 288 00:14:13,900 --> 00:14:17,800 they paid for Fox was consistent with the president multiples at 289 00:14:17,800 --> 00:14:19,300 the time. So they're saying, we don't 290 00:14:19,300 --> 00:14:21,200 really overpay. That's just how things were 291 00:14:21,200 --> 00:14:24,700 selling back in. In 18, 2009 teen things were 292 00:14:24,700 --> 00:14:27,100 more expensive back then multiples were higher. 293 00:14:27,300 --> 00:14:30,300 The market has come down again, I think some Fair points to be 294 00:14:30,300 --> 00:14:32,100 made. Now moving on we have Disney 295 00:14:32,100 --> 00:14:35,000 defending their balance sheet, this is a huge point of 296 00:14:35,000 --> 00:14:37,300 criticism and I think it's a concerning part of the 297 00:14:37,300 --> 00:14:40,600 investment thesis of Disney is they're growing leverage and 298 00:14:40,600 --> 00:14:43,000 their balance sheet but here they are defending it and let's 299 00:14:43,000 --> 00:14:44,500 go ahead and hear their argument. 300 00:14:44,500 --> 00:14:46,000 I'm going to give them a fair shake. 301 00:14:46,000 --> 00:14:48,100 So we'll hear their arguments and see if I agree with it. 302 00:14:48,600 --> 00:14:52,200 They say right now that the total debt is 46 billion. 303 00:14:52,300 --> 00:14:55,100 Dollars and the net debt is 35 billion. 304 00:14:55,200 --> 00:14:58,900 So, I mean, that out debt and cash, they say that what tree on 305 00:14:58,900 --> 00:15:02,700 is missing in their analysis, is that the unsecured credit rating 306 00:15:02,700 --> 00:15:08,900 a to is stable from Moody's, stable from Fitch and B B+ at 307 00:15:08,900 --> 00:15:12,800 SP, pelts calls, this a balance sheet from hell, right? 308 00:15:12,800 --> 00:15:15,400 They also say what Tran is missing is that the global 309 00:15:15,400 --> 00:15:20,500 pandemic in the year 2020 and 2021 dramatically impacted 310 00:15:20,500 --> 00:15:22,800 Disney. And as a result, we Made it that 311 00:15:22,800 --> 00:15:25,800 we lost billions and cash and provided operations. 312 00:15:26,200 --> 00:15:29,600 Let me get this straight Disney. So when you're trying to take 313 00:15:29,600 --> 00:15:34,100 credit for the performance of the stock you leave out 2020 and 314 00:15:34,100 --> 00:15:37,300 2021, you don't include that in your performance just a few 315 00:15:37,300 --> 00:15:39,800 slides ago. You conveniently leave that out. 316 00:15:39,800 --> 00:15:43,500 But later in the exact same slide presentation, when you're 317 00:15:43,500 --> 00:15:46,500 talking about things going wrong with the company, then you blame 318 00:15:46,500 --> 00:15:51,700 2020 and 2021. So what is it is 2020 and 2021 319 00:15:52,300 --> 00:15:54,500 Aided in the company's performance or not, because you 320 00:15:54,500 --> 00:15:57,600 can't simultaneously leave it out when you're talking about 321 00:15:57,600 --> 00:16:00,300 the performance and how great Disney has done relative to the 322 00:16:00,308 --> 00:16:04,200 S&P 500 and then use it as an excuse for your horrible balance 323 00:16:04,200 --> 00:16:06,600 sheet, but that is exactly what they're doing. 324 00:16:06,600 --> 00:16:10,000 They're using this as the excuse domestic and international parks 325 00:16:10,000 --> 00:16:12,900 and Resorts closed over five hundred and twenty eight and 326 00:16:12,900 --> 00:16:14,900 eight hundred and seventy-five days collectively. 327 00:16:15,300 --> 00:16:17,200 They say that their cruise lines were shut down. 328 00:16:17,400 --> 00:16:20,300 Their theaters were shut down. So business was closed and they 329 00:16:20,300 --> 00:16:23,300 took on a lot of debt now, ignoring the Elective timeline 330 00:16:23,300 --> 00:16:25,200 that Disney picks. We can at least, look at their 331 00:16:25,200 --> 00:16:28,300 measurement of their leverage. I think understates it a little 332 00:16:28,300 --> 00:16:31,100 bit when I went through the math on qual, trim and I looked at 333 00:16:31,100 --> 00:16:35,100 the exact numbers, the net debt, level to ibadah, I found was 334 00:16:35,100 --> 00:16:39,500 around 3.4 times and that is a little bit different than the 335 00:16:39,500 --> 00:16:42,800 calculation they came up with and they have a more specific 336 00:16:42,800 --> 00:16:45,300 nuanced way of looking at it that I don't necessarily agree 337 00:16:45,300 --> 00:16:47,200 with the way that I did. It was very straightforward. 338 00:16:47,200 --> 00:16:50,500 So I think either way the balance sheet really isn't a 339 00:16:50,508 --> 00:16:53,000 balance sheet from hell. I think that's Overstating it, 340 00:16:53,100 --> 00:16:54,700 but they took on a lot of Leverage. 341 00:16:54,700 --> 00:16:56,700 Their leverage has been going up over time. 342 00:16:57,000 --> 00:16:59,900 I don't consider that a good Trend at all and they also 343 00:16:59,900 --> 00:17:02,600 diluted the shareholder a lot with this fox deal. 344 00:17:02,700 --> 00:17:05,300 So both growing leverage and dilution. 345 00:17:05,500 --> 00:17:07,900 Both things that I don't think are really benefiting 346 00:17:07,900 --> 00:17:10,900 shareholders. Now they move on saying that and 347 00:17:10,900 --> 00:17:14,500 this is one of the most ironic things that they could say try 348 00:17:14,500 --> 00:17:17,400 to find the irony in the statement, I'll help you out, 349 00:17:17,500 --> 00:17:21,800 pelts has no track record and large cap, Media or Tech. 350 00:17:22,300 --> 00:17:25,599 No track record so they're criticizing this activist 351 00:17:25,599 --> 00:17:29,600 investor for not having a track record and wanting to offer 352 00:17:29,600 --> 00:17:31,700 suggestions and research and insights. 353 00:17:31,900 --> 00:17:34,300 Okay. Disney Nelson Peltz has no track 354 00:17:34,300 --> 00:17:36,700 record. Neither did Bob capek? 355 00:17:36,700 --> 00:17:39,100 He was the parks operator, and you put them as a CEO of the 356 00:17:39,100 --> 00:17:42,300 company and said that you had full faith, you endorsed him. 357 00:17:42,400 --> 00:17:45,400 He said that he was the one that was perfect for the job. 358 00:17:45,500 --> 00:17:47,500 I'm sorry. The irony is just so strong in 359 00:17:47,500 --> 00:17:50,900 them highlighting that you need a large cap media experience 360 00:17:51,200 --> 00:17:54,200 when Bob capek, The guy they picked had none of that. 361 00:17:54,700 --> 00:17:57,100 So now all of a sudden it's very important when you're talking to 362 00:17:57,100 --> 00:17:59,900 Nelson Peltz now. They do go through and criticize 363 00:17:59,900 --> 00:18:03,000 him and try to embarrass him through these. 364 00:18:03,000 --> 00:18:06,300 These little Snippets of what he said on his CNBC interview and 365 00:18:06,300 --> 00:18:08,700 I'll just give you an example of how misleading this is. 366 00:18:09,000 --> 00:18:11,800 Here's one of them, the investment thesis. 367 00:18:11,800 --> 00:18:16,100 Okay, so they highlight Nelson Peltz investment thesis, the 368 00:18:16,100 --> 00:18:20,700 CNBC anchor said why Disney and they simply highlight pelts 369 00:18:20,700 --> 00:18:24,600 saying, why not Why not? That's his investment thesis and 370 00:18:24,600 --> 00:18:26,100 they leave it there. Nothing else. 371 00:18:26,100 --> 00:18:27,700 So, that's how Disney's portraying this. 372 00:18:27,700 --> 00:18:30,000 Let's go ahead and go to that actual interview. 373 00:18:30,100 --> 00:18:35,000 What Nelson Peltz actually said, why not Disney just stopped it 374 00:18:35,000 --> 00:18:37,400 there and said that's his entire complaint. 375 00:18:37,400 --> 00:18:40,300 That's his investment thesis. This is what he goes on to say, 376 00:18:40,800 --> 00:18:44,700 we live skin in the game. You know, we look at a company 377 00:18:45,400 --> 00:18:49,400 and we look at this. The, and we say that this is The 378 00:18:49,400 --> 00:18:55,400 most Advantage consumer company on the planet and we love it. 379 00:18:55,600 --> 00:18:57,000 That's the reason why we're here. 380 00:18:57,800 --> 00:19:05,600 However, the TSR the total shareholder return over 135, 10 381 00:19:05,600 --> 00:19:11,300 years has materially underperformed, the S&P and 382 00:19:11,300 --> 00:19:16,600 underperformed the proxy peers that the companies selected. 383 00:19:16,700 --> 00:19:19,900 So Disney misrepresented. Now some help, It's they cut it 384 00:19:19,900 --> 00:19:22,000 off right after him saying, why not? 385 00:19:22,100 --> 00:19:24,300 And they didn't leave in the part where he goes on to say 386 00:19:24,300 --> 00:19:27,600 because you have underperformed the Benchmark index on the 387 00:19:27,600 --> 00:19:30,100 one-year, the three-year the five year and the tenure 388 00:19:30,100 --> 00:19:33,000 timeline, and you've underperformed your own pairs, 389 00:19:33,200 --> 00:19:35,000 which they have. Here's a look at Disney's 390 00:19:35,000 --> 00:19:36,700 performance over the 10-year timeline. 391 00:19:36,900 --> 00:19:39,700 Disney's, the one in red. The S&P 500 is the one in blue, 392 00:19:40,000 --> 00:19:42,300 Disney has underperformed the Benchmark index. 393 00:19:42,600 --> 00:19:45,000 And on, top of that they've underperformed at dramatically, 394 00:19:45,200 --> 00:19:49,000 the Walt Disney company has a compound annual growth rate of 395 00:19:49,100 --> 00:19:54,400 It's 7% while over the same time period, the S&P 500 was 12.4, so 396 00:19:54,400 --> 00:19:56,900 they're compounding at roughly half the rate. 397 00:19:56,900 --> 00:20:00,000 So, Disney, just highlighting Nelson Peltz his comments as why 398 00:20:00,000 --> 00:20:02,400 not. This is highly misleading. 399 00:20:02,400 --> 00:20:04,200 That is not what Nelson Peltz said. 400 00:20:04,300 --> 00:20:07,200 He highlighted how you have an advantage company with a wide 401 00:20:07,200 --> 00:20:10,400 moat and your underperforming, both the index and your peers. 402 00:20:10,700 --> 00:20:14,100 That's why not just why not? That was just two words he said 403 00:20:14,400 --> 00:20:17,700 again selectively picking that's what Disney's doing all 404 00:20:17,700 --> 00:20:19,800 throughout this presentation. They're picking their 405 00:20:19,800 --> 00:20:22,800 performance right before covid, but when they include the 406 00:20:22,800 --> 00:20:25,200 balance sheet there, including covid, as well as an excuse, 407 00:20:25,300 --> 00:20:27,700 they're selectively picking what Nelson Peltz said. 408 00:20:27,700 --> 00:20:30,100 Making him look stupid by saying, why not? 409 00:20:30,100 --> 00:20:31,600 That's why I'm involved in the company. 410 00:20:31,800 --> 00:20:35,400 This is so disingenuous now look, I understand why Disney's 411 00:20:35,400 --> 00:20:37,200 doing this. I understand why they're hitting 412 00:20:37,200 --> 00:20:38,900 back so hard against Nelson Peltz. 413 00:20:38,900 --> 00:20:41,500 They're misrepresenting what he said to make him look stupid. 414 00:20:42,100 --> 00:20:44,800 The reason why is something they don't address in this 415 00:20:44,800 --> 00:20:48,200 presentation, which is their excessive compensation, the 416 00:20:48,200 --> 00:20:51,000 Disney inside, Both the executives and the directors 417 00:20:51,000 --> 00:20:54,500 have paid themselves, hundreds of millions of dollars while 418 00:20:54,500 --> 00:20:57,800 underperforming both their peers and the index over the past 419 00:20:57,800 --> 00:21:01,600 decade, that's what's been going on and Disney does not like that 420 00:21:01,600 --> 00:21:03,300 Nelson. Peltz is coming in and 421 00:21:03,300 --> 00:21:07,000 highlighting their excessive pay compensation amidst their under 422 00:21:07,000 --> 00:21:09,000 performance. So that's something I can 423 00:21:09,000 --> 00:21:11,500 completely see why they want to misrepresent him and make him 424 00:21:11,500 --> 00:21:13,700 look dumb. He's going in and he's pointing 425 00:21:13,700 --> 00:21:15,100 out that they're over paying themselves. 426 00:21:15,400 --> 00:21:18,700 But overall, I would highlight this response from Disney as 427 00:21:18,700 --> 00:21:20,900 misleading. Leading, they selectively chose 428 00:21:20,900 --> 00:21:23,200 timelines that serve them when they're talking about 429 00:21:23,200 --> 00:21:25,400 performance highlighting their performance, right? 430 00:21:25,400 --> 00:21:28,200 Up until 2020 covid, and then ending it there. 431 00:21:28,200 --> 00:21:30,600 But then when they're talking about their balance sheet and 432 00:21:30,600 --> 00:21:34,600 their excessive leverage, then they include 2020 and 2021 as an 433 00:21:34,600 --> 00:21:39,000 excuse, they ignore, the fact that Bob capek even exists that 434 00:21:39,000 --> 00:21:41,900 they chose him that they endorsed him, that they had poor 435 00:21:41,900 --> 00:21:43,600 judgment, and who they put in place. 436 00:21:43,600 --> 00:21:46,100 And when they criticized, Nelson Peltz for not understanding a 437 00:21:46,100 --> 00:21:49,000 big Media company, they ignore the fact that they chose Bobbie. 438 00:21:49,100 --> 00:21:52,000 Hey, Peck as their executive, who is someone that didn't 439 00:21:52,000 --> 00:21:54,500 understand or have experience with a big Media company. 440 00:21:54,500 --> 00:21:56,700 And when they actually did address Nelson Peltz has 441 00:21:56,700 --> 00:21:59,800 specific criticisms, they grossly took his words out of 442 00:21:59,800 --> 00:22:02,200 context to intentionally, try to embarrass him. 443 00:22:02,500 --> 00:22:04,800 And the one thing that they left out of this presentation, that 444 00:22:04,800 --> 00:22:08,000 they didn't address at all, is there excessive pay for 445 00:22:08,000 --> 00:22:10,000 themselves amidst under performance? 446 00:22:10,200 --> 00:22:12,500 They conveniently just left that part right out. 447 00:22:12,500 --> 00:22:15,400 So overall I thought the presentation was misleading and 448 00:22:15,400 --> 00:22:17,600 I hope that Nelson Peltz does get a board seat. 449 00:22:18,000 --> 00:22:20,500 That's all for this episode. Hope you enjoyed seeing the next 450 00:22:20,500 --> 00:22:20,700 one.