I wrote a post on global equities and discussed Bob Iger’s return to Walt Disney earlier this week. Coincidentally, I had lunch on Wednesday with an old friend who happens to be the savviest US equities investor I know in Dubai and we spent the better part of an hour discussing our positions in DIS, among other names. So it came as no surprise to me when Wall Street activist legend Nelson Peltz launched a proxy fight for a board seat at Walt Disney after the board had replaced its chair, a move that electrified both Hollywood and the NYSE. DIS, which traded at 85 in mid-December, surged above 100 last night. Hallelujah, its raining yen – King Yen is now 128.50.

Nelson Peltz is an icon for me, as I have made money on several of his deals in the past decade. He doubled my money in Lazards and Invesco, and I even posted his argument for IVZ when he accumulated his stake at 13 and booked profits on the ideas at 26 in 2019. I remember that he galvanized Procter & Gamble so that the shares moved from 70 to 160. So I desperately hope that he wins a board seat at DIS and Bob Iger consults him on the very real strategy, execution, governance and capital allocation dilemmas faced by the Magic Kingdom.

Nelson’s critics in Hollywood say that his expertise in soaps, food, detergents and high finance means squat for a global media icon that creates intellectual property on a planetary scale. I disagree. Peltz’s indictment on Disney’s performance has great merit. The $71bn Fox deal with the Murdoch clan was a disaster, since it saddled Disney with $42bn debt on its balance sheet and a bigger footprint in linear television that slashed operating margins by 50%, triggered a 90% meltdown in free cash flow and the first dividend cut in 57 years. Yet Bob Iger was the sole architect of the Fox takeover and so Nelson has now battled the Jedi of Burbank for control of the House of Mouse. This is a soap opera played for the highest financial stakes on the NYSE and I am hooked on its real-time plot twists.

Santa got mugged in December by his reindeers, but the last two weeks in the markets have been pure bliss. Nelson Peltz is also spot on when he criticises the board and Iger for screwing up the CEO selection process that culminated in the sacking of Iger’s handpicked successor, Bob Chapek, thankfully after he bid a loony tune $3bn for broadcast rights for India’s cricket IPL.

There is no doubt that Bob Iger was also the architect of such brilliant game changer deals for Disney as Pixar, Marvel and Lucas Films, but it is undeniable that its shares lagged the index since 2016 and were butchered last year under Bob Chapek’s inept reign. Disney must now revamp its streaming business and cut its bloated cost structure. Something is seriously wrong when even a blockbuster box office sequel franchise like James Cameron’s Avatar has a global breakeven point of $2bn. Money does not grow on trees even in Tinsel Town in an era where zero cost capital is as dead and gone as the dinosaurs and black and white TV. Iger will have to focus on profits and not just sub growth at Disney+, now with 235 million subs.

Dan Loeb and Nelson Peltz are assets in the restructuring quest. DIS also needs a real CEO after Iger and reinstate its div. The theme parks in Orlando, Anaheim, Paris, Hong Kong and Shanghai are on a post-Covid roll. The movie business is a growth engine. DIS 120? Si, amigos!

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