Hedge fund manager Daniel Loeb is buying up Disney stock through his Third Point investments firm. Third Point now holds about $1 billion of Disney stock, which has gone up with the news of Loeb’s acquisition.
If he does gain at least some control in how Disney is run, Daniel Loeb made it clear that he has at least one thing in mind for change at the company and it has to do with ESPN. Loeb wants Disney to spin off its flailing sports network.
“ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting,” Loeb told Disney CEO Bob Chapek in a letter. “We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.”
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ESPN has been bleeding viewers for years. The age of live-streaming has not been kind to the once powerhouse of sports. It was an original content provider at the dawn of cable television, along with other specialty networks like CNN. But now, with all manner of streaming packages offered by the major sports, people no longer need to tune in for their sports content. And the Internet has mooted the need for sports fans to watch the once hugely popular Sports Center, a show that provides a roundup of the day’s sports news.
In fact, ESPN is only generating strong revenue in spite of plummeting ratings because Disney requires cable providers buy the channel as part of a package of Disney offerings. But more and more people are cutting the cord, dropping cable, and moving to live streaming alone. This means that sooner or later the cable companies will not be willing to pay for ESPN anymore. And this is what Daniel Loeb understands.
For its part, Disney responded to Daniel Loeb’s comments saying, “We welcome the views of all our investors. As our third quarter results demonstrate, The Walt Disney Company continues to deliver strong financial results powered by world-class storytelling and our unique and highly valuable content creation and distribution ecosystem.”
Third Point LLC is an SEC-registered investment adviser based in New York. The firm was founded in 1995 by Daniel S. Loeb, who serves as Chief Executive Officer. Third Point focuses on event-driven, value-oriented investing. Third Point invests in equity and credit securities in U.S. and international markets. The firm often engages with company management and boards to improve performance and will also take passive stakes in companies with a long-term view of value creation.
Daniel Loeb has served on five publicly traded company boards: Ligand Pharmaceuticals; POGO Producing Co.; Massey Energy; Yahoo!; and Sotheby’s, where he helped oversee the successful sale of the company.
Daniel Loeb graduated from Columbia University with an A.B. in economics in 1983, endowed the Daniel S. Loeb Scholarship for undergraduate study there, and received the school’s John Jay Award for distinguished professional achievement. In October 2020, he was awarded the Alexander Hamilton Award for his philanthropic service by the Manhattan Institute.