Activist Investor Dan Loeb Suggests Disney Spinoff ESPN, Integrate Hulu Into Disney+, and Cut Costs

Investor Daniel Loeb and his firm Third Point have reportedly purchased a “significant stake” in The Walt Disney Company. In turn, Loeb has sent a letter to Disney CEO Bob Chapek detailing some of his suggestions for the company.

What’s Happening:

  • As Bloomberg reports, after purchasing more shares of $DIS stock, activist investor Dan Loeb has outlined some steps he believes Disney should take.
  • Among them, Loeb suggests that Disney should explore spinning off ESPN into its own business.
  • Loeb writes, “ESPN is a great business that currently generates significant free cash flow. Despite these advantages, we believe that a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load that will alleviate leverage at the parent company.”
  • Additionally, Loeb states that the Hulu brand should be integrated into the Disney+ streaming service and that Disney should attempt to acquire Comcast’s share of Hulu sooner than the 2024 deadline to do so.
  • Lastly, Loeb insists that Disney needs to better cut costs, stating, “Disney’s costs are among the highest in the industry, and we believe Disney significantly underearns relative to its potential. We urge the Company to embark on a cost cutting program that addresses both margins and the disposal of excess underperforming assets.”
  • Loeb’s letter comes less than a week after The Walt Disney Company revealed its Q3 2022 earnings and streaming subscriber numbers.
  • Despite a spike in stock price that came after those results, $DIS is still well short of its $187 52-week high.