Disney Activist Blackwells Demands AI Strategy to Boost Shares

New Delhi | Updated: February 27, 2024, 15:55 PM IST

Key Points:

• Blackwells Capital urges Walt Disney to develop an artificial intelligence (AI) strategy.
• Proposal suggests AI strategy could potentially increase Disney’s stock price by up to 129%.
• Disney faces pressure from activist investors amid calls for potential company restructuring.
• Despite Disney’s historical investments in technology, Blackwells emphasizes the need for a more aggressive AI approach.
• Disney responds, reaffirming its commitment to enhancing shareholder value while rejecting proposed company breakup.

Walt Disney shareholder Blackwells Capital is urging the U.S. media and entertainment giant to develop an artificial intelligence (AI) strategy, suggesting it could significantly elevate the company’s stock price by up to 129%.

Blackwells, one of two activist investors vying for board seats at Disney, has been largely supportive of CEO Bob Iger’s leadership. However, it has recently proposed potential changes, including a breakup of the conglomerate and spinning off its park and hotel assets into a real estate investment trust.

In a presentation released on Monday, Blackwells emphasized the necessity for Disney to formulate an AI strategy and share elements of it with shareholders. The investor pointed out that major technology companies have experienced substantial market value growth after announcing significant AI initiatives, suggesting that Disney could similarly benefit from embracing AI technologies.

While Disney has made strides in investing in new technologies over several decades and formed an AI Task Force last year, Blackwells argues that more aggressive adoption and advocacy of a “technology native stack and mindset” could unlock greater potential for the company.

Responding to Blackwells’ proposals, Disney issued a letter to shareholders titled “Promises Made: Promises Kept,” affirming its commitment to enhancing shareholder value through an ambitious plan. The company expressed concerns about potential disruptions if Blackwells’ board nominees were elected and dismissed suggestions to spin off its land and hotels or break up the company as misconceived.

Blackwells, which seeks to secure three board seats at Disney, estimated that Disney’s share price could soar to $246.96 from its current level of $107.74 if its proposals were implemented.

The activist investor also recommended that Disney appoint a corporate chief technology officer to lead its technology transformation efforts.

Meanwhile, Nelson Peltz’s Trian Fund Management is also pushing for board representation at Disney, advocating for the election of its two director candidates.

Despite Disney’s long-standing involvement in technological innovation, including patents related to augmented reality and investments in virtual reality experiences, its foray into virtual worlds has not been devoid of challenges. The company has encountered setbacks such as the closure of virtual worlds inspired by popular film franchises and the sale of its game studio due to underperformance.

Nevertheless, Disney remains committed to exploring new frontiers, evident in its recent $1.5 billion investment in Fortnite-maker Epic Games and its collaboration with Apple to create content for the Apple Vision Pro mixed reality headset.