Gavin Doyle used allowance money in 2009, when he was 11, to buy some shares of Disney stock. They cost $31 each.
He now owns more than 400 shares — barely enough to be a speck of dust in the Disney investor galaxy. But the entertainment company, which has 1.8 billion shares outstanding, nevertheless blocked him for months with political-style campaign materials (letters, emails, social media ads) urging him to select some people on its board.
“I think every vote counts,” said Mr. Doyle, 26, who is running MickeyVisita non-Disney related blog dedicated to theme park vacation planning.
In most cases, global companies pay little attention to individual shareholders. Good institutional investors like mutual funds and index funds usually run the show. But Disney finds itself in an atypical situation as it tries to fend off Nelson Peltz, an activist investor who is seeking two board seats, including one for himself.
As much as 40 percent of Disney shares are held by individuals — retail investors, as Wall Street sometimes refers to them, with a hint of derision. On average in public companies, individuals represent closer to 15 percent of ownership, according to analysts and academic studies.
“In the retail market, many individuals don’t feel comfortable investing in companies they’ve never heard of,” said David Reibstein, a professor at the Wharton School at the University of Pennsylvania. “Disney is well known: I can relate to it, I’ve taken my kids there, I’ve seen their movies.”
In other words, the Disney-Peltz proxy battle, expected to be one of the most expensive in history, could be decided by the little people.
Disney’s fight with Mr. Peltz on Wednesday, when the company is scheduled to host its annual shareholder meeting. A smaller activist investor, Blackwells Capital, is also seeking seats on Disney’s board, much to the company’s chagrin. Although Mr. has a different view. Peltz and Blackwells on how Disney should be run — one wants “Netflix-like margins” of up to 20 percent on streaming, the other floats separating the company — they expressed the same basic motivation: Disney’s stock price wasn’t high enough.
Shares are trading at around $122, down from $197 three years ago.
Robert A. Iger, Disney’s chief executive, and the company’s 12-member board responded to the rebels like the Avengers fighting Thanos — that is, with surprising force. They say a 13-month-old turnaround plan is underway, and point to greatly improved finances, a new strategy for ESPN in the streaming age and a retrenchment at Marvel Studios to improve movie quality, among other things. initiatives. Yes, Disney stock is down from three years ago, but it’s up from $81 six months ago.
Disney executives have argued that Mr. Peltz was rooting for revenge. He is backed by Ike Perlmutter, the disgruntled former chairman of Marvel Entertainment, and aligned with Jay Rasulo, a former Disney executive who was passed over for the top job in 2015 and resigned. Elon Musk, throwing Mr. Iger since November, when Disney and other big companies stopped spending on X, has been pleased with Mr. Peltz.
At first, it looked like Disney was ready to beat Mr. Peltz. A parade of prominent shareholders (George Lucas, Laurene Powell Jobs), business titans (Jamie Dimon), analysts (Guggenheim, Macquarie), shareholder advisories (Glass Lewis, ValueEdge) and members of the Disney family (Abigail E. Disney) advised against giving Mr. Peltz sits on the company’s board.
But it evolved into a much closer contest. Two weeks ago, an influential proxy firm, ISS, slightly sided with Mr. Peltz, recommending that shareholders elect him to the board and advising against adding Mr. Rasulo. In general, ISS cited Disney’s flawed succession planning. On Tuesday, Mr. Peltz won with the support of Egan-Jonesanother advisory firm.
As far as ISS weighing in, “I’m sure Peltz is a little bit cooked,” said Michael Levin, an independent activist investor and adviser who oversees the website Activist Investor. Mr. Levin estimated that the ISS recommendation could influence 5 to 10 percent of Disney’s vote, with institutional shareholders such as Vanguard and BlackRock likely to pay attention.
Mom-and-pop shareholders are more of a mystery. Retail investors are often apathetic, even in the face of a contest, proxy experts say. “You have to find a way to connect with someone who doesn’t need to vote, who doesn’t have it in their routine,” Bruce Goldfarb, the chief executive of Okapi Partners, a proxy solicitation firm that works with Mr. Peltz, said. said at a recent conference.
Disney and Mr. Peltz will each spend a lot to get the little vote. Trian Partners, investment company of Mr. Peltz, in a securities filing it is expected to spend about $25 million in total on its campaign; it hired Okapi and another firm, DF King, to help identify shareholders and encourage them to vote. Disney, which partnered with Innisfree M&A firm, among others, priced its countercampaign at up to $40 million.
In part to appeal to individual shareholders, Disney assigned characters like Moana and Iron Man to solicit votes. In February, the company released a animated video starring Donald Duck’s uncle, Professor Ludwig Von Drake. “Voting this year is critical no matter how much or how little stock you may own,” a narrator said. “Don’t vote for Trian Group or Blackwells nominees.”
Mr. replied. Peltz wrote a letter to Disney shareholders that included a cartoon showing bored and haggard board members and a messy bowl of noodles. “Spaghetti on the wall won’t feed shareholders hungry for returns” headlined the letter.
Douglas Chia, the president of Soundboard Governance, which advises on corporate governance, has received calls from both sides of the battle. Mr. Chia, who says he owns several hundred shares of Disney, said he was not impressed by the initial call on Trian’s behalf. (Mr. Chia admits that his professional background has trained him to ask questions a traditional retail investor might not.)
After he posted about it on LinkedIn, he received a follow-up call from Trian directly, emphasizing how much attention each side paid to each vote.
“It was very senatorial people in Trian who talked to me for about 45 minutes,” Mr. Chia said. “And it’s like: The meeting is less than a week away — they could be on the phone with BlackRock.” (Mr. Chia said he was not convinced by Trian’s arguments, but appreciated the follow-up call.)
Retail investors tend to side with management in proxy contests. In Disney’s case, many of these shareholders are fans.
Cori Borgstadt has been a Disney stockholder since 2008, when his grandmother gave him a share for Christmas. He is 3 years old. Ms. Borgstadt, who continued to acquire shares, said he had read several news articles about the proxy contest but largely ignored Trian’s case.
“I admire Bob Iger, and I trust him to know what’s right,” Ms. Borgstadt. “That’s why I voted for the white slate.” (Each side has a ballot — white for Disney, blue for Trian.)
However, experts say there is one big factor in Disney’s fight that could affect fans’ instinct to support Mr. Iger. It has something to do with politics.
Disney has become a political punching bag in recent years, partly because it has added openly gay, lesbian and queer characters to its animated films. The emphasis on diversity in some of Disney’s live-action films, including “The Little Mermaid” and “The Marvels,” has also led to fan complaints. While Disney also received positive reactions, the blowback – and poor ticket sales for some of the films in question – prompted Disney to retrench.
In what some proxy solicitation experts viewed as an appeal to disenfranchised Disney fans, Mr. Peltz recently waded into the “woke Disney” debate by commenting on “The Marvels,” which focused on female superheroes, and “Black Panther,” which had an all-Black principal cast.
“Why do I have to have an all-female Marvel? It’s not that I don’t have anything against women, but why do I have to do that?” Mr. Peltz told The Financial Times. “Why don’t I have the same Marvels? Why do I need an all-Black cast?”
The move could “backfire against him — there are probably a lot of Disney investors who support diversity in content,” said Scott Bisang, a partner at Collected Strategies, a communications firm. “But I don’t think he would have done that unless he thought there was some kind of audience support for it.”
Mr. Peltz has won proxy fights with retail investors before. In 2017, he won what was then the most expensive proxy fight in history at Procter & Gamble by a margin of about 0.0016 percent. (The sides spent about $60 million, or $77 million in today’s money.)
But he lost a hotly contested proxy contest to DuPont in 2015, with study citing retail investors as a reason.
As Mr. Peltz said in a January securities filing detailing some of Trian’s outreach to Disney shareholders, “Every vote counts!”
Audio produced by Jack D’Isidoro.
