Welcome back to Forests Over Trees, your weekly tech strategy newsletter. It’s time to zoom-out, connect dots, and (try to) predict the future.

Last week, I heard a name I haven’t heard in forever, and it sent me on a trip down memory lane. Any guesses?

Hint: it starts with  a ‘P’…

…and it has to do with Disney.

Yeah, it’s this guy.

Nelson Peltz launched a proxy battle with Disney back in 2022, complaining about the company’s plans and their leaders. And wow – there were some crazy twists and turns after that – which I wrote about last year.

But when I heard his name the other day, I realized I didn’t know how the story ended.

So I looked into it… and it’s a hell of an ending.

Today, I’m re-sharing the story and adding the missing chapter. Enjoy!

Disney, Pirates, and Treasure Maps

Imagine you’re the captain of a pirate ship. You’ve even got a treasure map and a crew to help you find it. You’re making your way and stopping every now and then to resupply and fix the ship.

The crew loves the stops. Why? Because they get to see people that don’t live on the stinking ship! They also get to hear how confident the islanders are in your plan. “You’re headed in the right direction” they tell the crew. And you puff your chest out when you hear “there are other captains taking their crews that way too, but you look stronger than them – I think you’ll find the treasure first”.

But then you hit a string of bad luck. Scurvy or a bad storm or something. I don’t know… pirate stuff?! Anyway, your bad luck causes the island stops to take on a different tone. Rather than singing your praises – raising the confidence of the crew – the islanders turn sour. “That storm seems to have dinged you up pretty good”, “that other captain was smarter”, and “are you sure you trust your captain’s map?”.

Before long, the crew doesn’t laugh quite as hard at your jokes. They don’t grin back at you, they grimace. Work on the ship slows down, and some days it feels like you’re hardly moving. Then one day, a crewmember launches an impromptu meeting in broad daylight.

Is this a mutiny?!

No… but by the time you get there, the ring-leader has a bunch of people gathered around, nodding their heads in agreement. “We should be following this map instead”, you hear the ring-leader say. But this new map says the treasure is in a completely different spot.

You’re losing the crew, but you’re still in charge…for now. What do you do?

Bob, Meet Nelson

Disney CEO Bob Iger is the real-life version of the pirate captain, and right now the ring-leader with the new map is activist investor Nelson Peltz. Why does he care which map gets used? Because Peltz’ hedge fund owns a bunch of Disney stock ($2.5B worth), and he wants them to find treasure as soon as humanly possible, raising the stock price in the process.

He first raised concerns about Disney’s leadership and direction back in November 2022, when Bob Chapek was still CEO. Ultimately, Peltz backed off when Disney:

1. Fired Bob Chapek and brought back former CEO Bob Iger

2. Announced some restructuring (including 7K layoffs…)

3. Reintroduced an annual dividend for shareholders

They did all of that by February 2023, a short 3 months after the dust storm got kicked off. So Peltz calmed down and said the fight was over.

So if you’re asking yourself why Peltz is back now, you’re not alone. And there are two parts to the answer. First, Bob Iger hasn’t found any treasure. Here’s the stock price – the peak here is from February, when the first round with Peltz was nearly over.

That’s a 26% drop since the first round of the fight…

The second part, and the one that requires some explaining, is that Peltz thinks he has a better treasure map than Iger.

The Peltz Plan

For lack of new updates, I’ll share what Peltz was sharing publicly back in Feb 2023 (note: I’m paraphrasing… pirates typically don’t use numbered lists):

1. Disney should be more efficient and conservative in its streaming content spend.

2. Disney relies too much on profits from the parks business to subsidize other struggling units.

3. Disney needs to take succession seriously. Bad leadership and turnover in the CEO role can tank the business.

To help accomplish the above, Peltz also specified last week that he now wants two board seats – one for himself and one that he picks. Having two spots on the Disney board will give him a front-row seat and a chance to steer as much as possible in the direction he thinks has treasure.

Evaluating the plan

I wrote about exploding content costs in July, so I know they’re up 86.5% for the industry in the last 5 years… but as I said in that earlier post:

We (Peltz and I) are zeroing-in on the same dynamic – a cutthroat, cash-strapped streaming business being subsidized by parks – but I think it’s worth the investment. Because Disney has other revenue sources, they can out-last their competitors. When those competitors hit the wall, Disney stands a pretty strong chance of capturing that demand and growing its viewership. It just needs to keep up the fight.

As for the succession planning, I think Peltz is over-reacting, but he’s not completely wrong. In July 2023, Iger’s contract was extended by two years, now ending in 2026. To explain the extension, he pointed out that he needs to make serious changes, and that those changes will take time. I wrote before about why corporate change management is so hard, so I tend to agree that serious changes take time… but he left the CEO job in Feb 2020 and came back in Nov 2022. Four years to undo mistakes that your predecessor (who you handpicked) made in your three-year absence? The truth is that some of the mistakes you’re undoing are your own at that point, and you seem to be kicking the succession can down the road again…

The Missing Chapter

As we know from last time – part of Peltz’s plan was to get on the Disney board.

But despite dozens of meetings with key shareholders and months of time spent, he wasn’t able to get it done. In April 2024, his nominees (himself and another former Disney exec) – were rejected.

So afterwards, he did what anyone would do…

He took a victory lap. What!? This was from the announcement his firm put out:

It turns out, in the days after losing the proxy fight, he sold all his shares. Disney’s stock was up 11% at the time, and Peltz netted ~$1B on the trade.

But in the interviews afterward, he made it clear that he wasn’t going completely away. Here’s an incredible, ominous quote:

Since he said that, Disney’s stock is down 25%... so I would not be surprised if we see Peltz jump back in soon.