What will Peltz do now?
Shares in Disney are up more than 7 percent in premarket trading on Thursday, after the entertainment giant released blockbuster quarterly earnings and made a string of headline-grabbing announcements. (Taylor Swift! Fortnite! A “Moana” sequel!)
In short, the House of Mouse bolstered its case against the activist investor Nelson Peltz, who is seeking two board seats. The question is whether that will be enough to definitively fend off the financier.
Disney had a great quarter. Not only did it surpass analysts’ profit expectations — earnings per share last quarter beat estimates by 23 percent — but the company also promised a generous dividend and cut streaming losses more than anticipated, to $138 million.
The company also broke with precedent by giving profit guidance, forecasting that its full-year per-share earnings would increase at least 20 percent compared with 2023.
And then there were the surprise announcements:
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Disney again sought to tap into Swift mania by landing an exclusive cut of the pop star’s “Eras Tour” concert movie for Disney+. (Swift’s announcement of the film garnered six million likes on Instagram.)
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The company also invested $1.5 billion in Epic Games as part of a deal to create a Disney-themed universe connected to Fortnite.
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Disney confirmed that it would finally introduce the flagship streaming version of ESPN, including its primary programming and sports betting in 2025.
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And the entertainment giant said a sequel to “Moana,” the 2016 hit that according to Nielsen was last year’s most-streamed movie, would hit theaters in November.
Bob Iger, Disney’s chief, trumpeted the results, and suggested that these moves had been in the works before Peltz began his latest activist campaign.
“Just one year ago, we outlined an ambitious plan to return the Walt Disney Company to a period of sustained growth and shareholder value creation,” Iger said. “Our strong performance this past quarter demonstrates we have turned the corner.”
It’s unclear how Peltz will counter Disney’s moves. A spokesman for the financier played down the news, telling DealBook: “We saw this movie last year, and we didn’t like the ending.” To win over investors, the activist investor will have to poke holes in Disney’s new commitments. Will he remind people about the company’s checkered history of video game investments? Continue to needle Iger on succession?
Peltz is expected to release one of his signature white papers, more fully explaining his case to investors, soon, though his spokesman declined to comment on its timing.
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In other media news: The N.F.L. and the N.B.A. were reportedly blindsided by the newly announced sports streaming venture announced by Disney, Fox and Warner Bros. Discovery.
HERE’S WHAT’S HAPPENING
SoftBank reports its first quarterly profit in more than a year. The Japanese tech giant beat expectations, driven by huge paper gains on its stake in the chip designer Arm (though it can’t yet capitalize on that company’s soaring stock price by selling its shares) and investments made by its Vision Funds.
Consumer prices plummet in China. Prices last month fell 0.8 percent year-on-year, according to government data, their fastest rate in 15 years. That was worse than analysts’ expectations and added to concerns about deflation in the world’s second-largest economy.
Earth extends its heat streak. Last month was the hottest January on record, according to the E.U. climate monitor. The latest data also revealed that 2023 was also the first full year in modern history that the world’s average temperature rise exceeded 1.5 degrees Celsius, a level that scientists regard as critical for climate change.
The U.S. national debt could reach $54 trillion over the next decade. The federal government is set to add nearly $19 trillion to its debt load as it grapples with aging Americans and higher interest expenses, according to the nonpartisan Congressional Budget Office. Efforts to slow down growth in federal spending are helping, the agency found, but the country is likely to rack up more debt to G.D.P. than at any point in its history.
Headaches remain for regional lenders
Some calm has returned for regional bank stocks on Thursday morning after a roller-coaster ride for New York Community Bancorp. But investors remain leery of the trouble that commercial real estate still poses for smaller lenders.
N.Y.C.B. sought to assure investors on Wednesday, after Moody’s downgraded its stock following losses on loans tied to office and apartment buildings. The lender announced asset sales and argued that its troubles weren’t analogous to the crisis last year that took down Silicon Valley Bank.
But shares in the bank are down 5 percent in premarket trading amid questions about its long-term finances. Bank of America analysts on Wednesday downgraded the stock, warning of an “elevated headline risk” that customers could pull their money out of N.Y.C.B.
Concerns about other lenders are growing. The turmoil at N.Y.C.B. has cast a spotlight on the troubled commercial real estate sector, where shrinking office occupancy rates and high interest rates are expected to lead to a tsunami of defaults starting this year. Regional banks are the biggest lenders to the market.
Barry Sternlicht, the billionaire real estate investor, predicted last week that commercial property losses could top $1 trillion. And a recent study by the National Bureau of Economic Research estimated that up to 20 percent of these loans are at risk of default, close to a level last seen during the 2008 financial crisis.
Such losses wouldn’t pose a systemic risk for the wider banking sector, according to João Granja, a professor of accounting at the University of Chicago Booth School of Business who has studied banking crises. Though a key funding program created by the Fed last year is set to expire next month, he told DealBook that Washington had been increasingly creative in finding ways to offer help.
But the troubles in real estate could chill lending more broadly and stymie economic activity. “If the banks started calling back these loans because of missed payments,” he said, “everything could start to spiral in a very negative way.”
That hasn’t been enough to dampen broader market sentiment. The S&P 500 is less than 0.1 percent away from 5,000, bolstered by an artificial intelligence-fueled rally in shares of the so-called Magnificent Seven tech giants.
Figma moves on from its broken deal
For Figma, a fast-growing design software start-up, a $20 billion takeover bid by Adobe promised to be transformative, giving it vast resources and offering employees a windfall.
But antitrust scrutiny in Britain and elsewhere killed that deal, with Figma left with a $1 billion breakup fee from its former suitor. The company has tried to move on — including by resetting its internal valuation to $10 billion and offering severance to workers who wanted to quit — but the process hasn’t been easy, The Times’s Erin Griffith reports.
Figma’s backers, including Sequoia Capital, see brighter days ahead — even if, as one investor told The Times, “we probably wasted a bunch of Delta Sky Miles flying back and forth across the ocean for the last 18 months.”
Some venture capitalists said that they had now set a higher bar for pursuing a transaction, and would increasingly focus on securing hefty breakup fees in case deals fall apart.
But many workers have had a harder time, Erin writes:
Figma’s employees absorbed the news that they wouldn’t see a windfall. Some, who had put their lives on pause waiting for the deal to close, were relieved to have clarity.
“For anyone that’s been through an acquisition, you’ll know how the limbo period can be the toughest,” Hugo Raymond, a Figma employee, wrote on X.
Mr. Pearson said he had tried not to dwell on the value of his Figma shares, knowing the deal might fall apart. But it was difficult, he said. He had started an indie music record label that he planned to support with earnings from his stock.
“A couple of C.E.O.s from, say, food companies have been calling me.”
— Lars Fruergaard Jorgensen, the head of Novo Nordisk, telling Bloomberg that “scared” executives were asking about the Danish drugmaker’s weight loss drugs, Ozempic and Wegovy, and what effect they may have on their businesses.
Is Biden playing politics with energy policy?
The Biden administration’s move to pause authorizing new liquefied natural gas export plants has been applauded by those campaigning against climate change and denounced by the energy industry.
The decision could offer clues about how President Biden will calibrate his approach to big business and voters ahead of the election and will come under renewed scrutiny in a Senate hearing on Thurday.
Biden says the move is about energy security, the economy and the environment. One reason: The U.S. became the world’s top L.N.G. exporter after demand soared in Europe following Moscow’s 2022 full-scale invasion of Ukraine and American allies looked for alternatives to Russian energy.
The pause is intended to offer time to examine the effect of L.N.G. exports on energy costs and climate change, a top concern for progressives and younger voters. Some U.S. business sectors, including chemicals, steel, food and agriculture, also say that unrestricted exports may increase L.N.G. prices at home.
The politics are becoming heated. Executives say the White House’s move is a political ploy at a time when Donald Trump, who leads the race for the Republican nomination, has promised to increase fossil-fuel production if he’s re-elected. The executives also say that L.N.G. plays a key role in the transition away from dirtier fuels like coal.
Thursday’s hearing will delve into the differences. Among those set to appear is David Turk, the deputy energy secretary.
Committee members warn that the decision is a mistake. Senator John Barrasso, Republican of Wyoming, a big producer of L.N.G., said the move would hurt allies and boost rivals. “Joe Biden is pushing our friends into the arms of adversaries like Russia and Iran, who will be all too happy to take our place in the market,” he told DealBook.
THE SPEED READ
Deals
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The hedge fund mogul Bill Ackman plans to create a publicly traded investment vehicle for retail investors. (CNBC)
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Shares in Soho House fell as much as 30 percent after a short-seller said that the stock price of the luxury hotel and members’ club operator should fall to zero. (Bloomberg)
Policy
Best of the rest
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Court documents reportedly show that Jes Staley, the former C.E.O. of Barclays, maintained contact with the sex offender Jeffrey Epstein for years after he said he had cut ties. (Bloomberg)
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The P.R. firm Brunswick Group has hired Henry Timms, the former head of Lincoln Center for the Performing Arts, as its new C.E.O. (FT)
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