Investors Cheer Leadership Shakeup at Disney
Shares in the entertainment giant climbed more than 9 percent in premarket trading on Monday following the ouster of chief executive officer Bob Chapek.
Iger in, Chapek out at Disney
Last December, Robert Iger told a Variety reporter he wasn’t second-guessing his departure from Disney after leading the entertainment giant on a 15-year run of growth and profits. Besides, he’d later acknowledge, Hollywood is going through an “age of great anxiety” with uncertainty at the box office and in the streaming wars.
Now, in a move that’s stunned Hollywood, Mr. Iger is back in the top job. Disney on Sunday night fired his handpicked successor, Bob Chapek, as C.E.O. The 71-year-old Iger has signed a two-year contract as his replacement. Jobs one and two for Mr. Iger: restore the company’s fortunes and groom a successor, meaning the “Game of Thrones”-like contest to find a replacement begins immediately.
The intrigue is where Iger may turn for the next leader, and what are his plans for Hulu, the streaming service in which Disney holds a majority stake. Dan Loeb, the activist investor, had been pushing Disney to combine Hulu with Disney+, the company’s own streaming service. Meanwhile on the succession front, Peter Rice, a top content chief at Disney, and Kevin Mayer, one of the architects behind the launch of Disney+, are no longer at the company. Will Iger try to bring them back?
Disney shares soared in premarket trading this morning, but are off by more than 40 percent this year. The stock is on its worst run since at least the 1970s, according to Bloomberg, tumbling by 22 percent under Mr. Chapek and wiping out roughly $35 billion in market cap.
Pressure has been building from activist investors, with Nelson Peltz’s Trian Fund Management joining Mr. Loeb’s Third Point in calling for big changes. (Mr. Peltz, though, doesn’t want Iger back, The Wall Street Journal reports. Reed Hastings, the co-C.E.O. of Netflix, meanwhile, wrote on Twitter that he wished Iger would have gotten out of Hollywood and instead run for president.) Mr. Iger had also seen enough, telling confidants that he was “devastated” by Disney’s decline, The Times’ Brooks Barnes reports.
Credit...The New York Times
Mr. Chapek’s tenure was marked by the pandemic and PR disasters. He took over Disney in February 2020, a few weeks before Covid-19 forced the company to shut down its theme parks. With people stuck at home, the company doubled down on Disney+, a strategy that worked well … until it didn’t.
On Nov. 8, Disney reported that quarterly losses at the unit had more than doubled to $1.5 billion and revenues missed expectations. Investors were mortified by Chapek’s sunny tone on a call following the results, and shares fell 12 percent the next day.
On the Hollywood front, Disney under Mr. Chapek was embroiled in a contentious pay dispute with the actress Scarlett Johansson, and Mr. Chapek fired his top TV content executive, Rice, sending a shock wave through the industry.
Chapek was also bruised by America’s culture wars, angering both employees and Ron DeSantis, the Republican governor of Florida, with his response to the Parental Rights in Education Act — or what critics call the “Don’t Say Gay” bill. Mr. Chapek sparked a staff uproar by not taking a public stand. When he eventually weighed in, it provoked a political backlash.
Mr. Iger had been away from the company for less than a year, having served as executive chairman through the end of 2021. He told Disney employees in an email of his “amazement” at being back. Just two months ago, he had joined Thrive Capital, the venture fund, as a partner, and the board of Genies Inc, a crypto avatar company. It’s unclear if he will remain at the companies.
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Heaviest Fighting in Years Breaks Out in Congo as Rivals Seek Control of Minerals
Clashes erupt between the Congolese army and Rwanda-backed militias as fighting for control of Congo’s vast mineral riches erupts again
Long-simmering ethnic tensions in the eastern Democratic Republic of Congo—fed at times by its neighbors—have erupted into the most intense clashes in a decade as warring militias fight for control of the region and its mineral riches.
In recent days, the M23 rebel group has advanced to within 12 miles of the city of Goma, pushing United Nations-backed Congolese government forces from several surrounding towns. More than two million people are suffering shortages of food and fuel as a result of the fighting.
The M23 group, estimated to have 2,000 men under arms and backed by neighboring Rwanda and Uganda, is seeking greater influence in a country that is home to the world’s largest deposits of tantalum, used in smartphones and personal computers.
The advance raises the prospect that M23 and its foreign allies could dominate a region that also produces tin, gold and coltan, and exacerbate a humanitarian situation in a country that already hosts more displaced people than any other in Africa.
M23 says it is fighting to defend Congolese Tutsis, Rwanda’s dominant ethnic group, against ethnic Hutu militias. Its rise has helped transform Rwanda, which produces little tantalum, into the world’s second-largest exporter of the rare blue-grey metal, because it controls informal supply chains that funnel the Congolese-mined mineral across the border, researchers and U.N. investigators say.
Congo accuses Rwandan President Paul Kagame, a Tutsi, of using the group to seize control of the region’s minerals. Mr. Kagame says M23 is a Congolese group fighting for legitimate political rights, and has ignored international pleas to halt his support for the rebel group, which is led by commanders who previously served in the Rwandan army.
Uganda was ordered in February by the International Court of Justice to pay Congo $325 million in reparations for its role in the plundering of the country’s resources.
Regional diplomats and analysts say the latest fighting was triggered when Congolese President Félix Tshisekedi allowed Uganda to deploy troops to conduct joint operations against Islamic State-affiliated Allied Democratic Forces operating in Congo last year. The move pressured Rwanda, which competes with Uganda over control of Congo’s mineral riches, to intervene, according to the International Crisis Group.
In Goma, food stocks are running low after rebels cut off the main highway to the north, sending prices of staples from beans to fish spiraling. Sporadic protests have erupted, with hundreds of demonstrators attacking military and U.N. installations to protest against the army’s failure to defeat the rebels. Frightened residents fear an imminent attack, locals and activists say.
“We are very scared,” said Pascal Burasa, a schoolteacher who recently fled to Goma from his hometown of Rutshuru, now under rebel control. “This is a direct aggression against a sovereign country, the international community should intervene.”
The battle for Goma, which has already uprooted more than 260,000 people from their homes, could reignite regional rivalries and revive other local insurgents. That would undermine recent efforts by Mr. Tshisekedi to end decades of conflict in the region by mending relations with neighboring states and working closely with a 12,000-strong U.N. force. But in recent months, these hopes have vanished: Dozens of people have been killed since July, while hundreds of protesters have attacked U.N. bases, angered by the perceived inability of peacekeepers to keep civilians safe.
U.N. investigators warned in August that M23 rebels planned to recapture the city to extract political concessions from the Congolese government.
Regional leaders have sought to resolve tensions between Congo and Rwanda, with leaders of the East African Community bloc saying on Nov. 13 that peace talks would start in Kenya before the end of November. Hundreds of additional troops from Kenya arrived in Goma on Nov. 12 as part of regional efforts to bolster government defenses.
“State support of armed groups is unacceptable, and we reiterate our concern about Rwanda’s support to the M23,” Ned Price, spokesman for the U.S. State Department, said last month, adding that Secretary of State Antony Blinken delivered that message to Rwandan officials during a visit to the country in August.
After briefly occupying Goma in 2012, the M23 rebels reached a peace deal with the government and were integrated into the Congolese military in 2013.
A year later, Rwanda emerged as a top producer of tin, tungsten and tantalum—minerals used in the aerospace and electronics industry that are extracted primarily by miners digging pits across Congolese hillsides and river banks.
Rwanda, which says the minerals come from Rwandan mines in compliance with regulatory requirements, supplied some 39% of the world’s tantalum from 2015 to 2018, compared with 10% from Congo, according to the U.S. Geological Survey.
Rwanda’s annual mineral exports earnings more than doubled last year to $732 million, according to Rwandan government data. In Uganda, gold exports have also surged in the past decade, overtaking coffee as the country’s leading export commodity for the first time. The U.N. estimates that more than 90% of the minerals out of Congo are smuggled into Uganda, Rwanda and Burundi.
“The M23 are not rebels, they were sent in Congo by Kagame because his objective is to get a hold of Congolese minerals,” Congolese opposition leader Martin Fayulu said in a recent interview with German television station DW. “Uganda doesn’t want to stay behind, it also wants a portion of Congolese resources.”
Electric car charger Pod Point issues profit warning on delayed home installations
Customers put off purchases because of long wait times to buy plug-in vehicles
Electric car charging group Pod Point issued a profits warning after long waiting times for plug-in vehicles led car buyers to delay installing home chargers, its largest source of revenue.
Sales growth of electric vehicles or hybrids that plug in to recharge has “slowed markedly” over the past year and a half, the EDF-backed group warned, prompting shares to fall 6 per cent to 71.40p by late morning on Monday.
In some cases, global supply constraints mean customers are waiting for more than a year for new models, leading buyers to push back paying for a charging point at home.
As a result, the company expects to make a £7mn loss this year on sales of £70mn, with the problem likely to lead to a “mid-single digit” loss during 2023 as well.
There is “no shortage of demand” for battery-powered cars, said Pod Point chief executive Erik Fairbairn, but “there is just insufficient supply of vehicles coming into the market”.
“Any industry linked to the sale of new plug-in vehicles gets affected by that,” he told the Financial Times.
He expects the UK to hit its long-term target of phasing out petrol and diesel car sales by 2030, but with a steeper than expected increase in the second half of the decade.
“It is going to be a bit tougher for the industry over the next year,” he added. “This is a very small road hump in the journey towards electrification.”
About one in five new vehicles sold in the UK are battery electric or plug-in hybrid, according to official figures from industry body SMMT.
Sales growth slowed to 7 per cent in the second half of the year compared with a year earlier after rising 26 per cent in the first half.
Shortages of semiconductors and unpredictability of other key parts mean Pod Point does not expect supply of electric cars to ease until 2024.
About 60 per cent of Pod Point’s revenues come from fitting home chargers, with the rest from workplace and other commercial installations.
Demand from businesses for charging stations has also slowed slightly, Fairbairn added, as companies rein in spending because of the economic conditions.
The number of charge points it fits for companies would be growing “slightly faster without the macro situation”, he said, but added that long waiting times for car orders were still the largest drag on the rollout.
The company installs charging points at Tesco and Aldi, and for businesses including Thames Water and DHL.
Bob Iger returns to Disney as Chapek ousted as chief executive
Entertainment company replaces leader after short tenure marked by controversy and missteps
Bob Iger, who served as Disney chief executive for 15 years, has stunned Hollywood by returning to replace his successor Bob Chapek after a rocky tenure that lasted just 33 months.
Iger, who handpicked Chapek as his successor only to see the relationship quickly sour, will serve another two years in the job that made him one of the world’s most celebrated business leaders.
His abrupt return reflects what the board regarded as an irretrievable loss of confidence in Chapek’s leadership, which steered Disney through the pandemic but struggled to win over investors and Hollywood’s creative community. Disney shares jumped 8 per cent in pre-market trading in New York on Monday.
In a statement, Disney said that Iger has “a mandate from the Board to set the strategic direction for renewed growth”. He will also work closely with the board to find a successor.
Iger, who delayed his retirement four times before finally leaving the company, said in a memo to staff on Sunday that he felt “a bit of amazement” that he was returning to the company as chief executive.
Before today, the stock had fallen more than 40 per cent this year amid growing investor concerns about the high costs of its streaming business. Disney has spent billions — its content budget this year alone was $30bn — as it competes with Netflix and other streamers for subscribers.
Chapek also found himself at the centre of a culture war this spring over a Florida law regulating what teachers can say about LGBT+ issues. The messy fight with Florida governor Ron DeSantis generated negative headlines for weeks and upset LGBT+ staff members and their allies.
Within the company, a shake-up that concentrated significant power with Chapek’s allies had also been a source of longstanding discontent among the top ranks of the Disney’s management, who saw the new structures as unwieldy and unnecessary.
Despite the difficulties, the board renewed Chapek’s contract this summer. The decision to bring Iger back into the company marks a surprising reversal by the board chair, Susan Arnold.
“The Board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the Company through this pivotal period,” Arnold said in a statement.
Rich Greenfield, an analyst at LightShed Partners, said the move was “strange in light of the board’s recent renewal” of Chapek’s contract.
Iger will take over the company as it seeks to staunch billions of dollars in losses in its streaming business — in part a legacy of his own decision to plunge the company headfirst into a streaming war with Netflix. Next month, Disney will launch an advertising-based version of the Disney Plus service as the company aims for profitability in streaming by 2024.
This month, Disney shocked investors with news that operating losses from its streaming service had rocketed by $800mn to $1.5bn thanks to higher content spending and marketing expenses in the third quarter. As a result, operating income at Disney’s media and entertainment group plunged 91 per cent to $83mn.
Greenfield says Iger will also need to make tough decisions about whether to spin off the ESPN sports television network and buy out Comcast’s stake in the Hulu streaming service.
Iger has long been an investor favourite. During his tenure, he transformed Disney through a series of acquisitions — including Marvel, Pixar, Lucasfilm and 20th Century Fox — that left it holding a collection of the most valuable franchises in the entertainment business.
Under Chapek, Disney’s streaming services — which include Disney Plus, Hulu and ESPN Plus — have experienced blistering growth, reaching a combined 235.7mn subscribers; more than the 227mn that industry pioneer Netflix expects to have by the end of this year. He also oversaw the revival of Disney’s theme parks business, which he once ran, as Covid-19 restrictions eased.
Chapek took the reins before the onset of the pandemic in February 2020, and found himself shutting down the company’s theme parks and other operations just weeks later. Soon, he and Iger — who had remained on as chair — began to clash, with Iger suggesting that he would take a greater role in running the company during the crisis. Iger’s tenure as chair ended in January.
A reserved midwesterner with a background in marketing and sales, Chapek was never accepted by the Hollywood elite — in contrast with Iger, who enjoyed the creative side of the business and the glitz of the movie industry. In an interview with the Financial Times last year, Chapek pushed back against his image as a bean counter, saying: “I’ve seen creativity in this company through every lens possible.”
Still, Chapek made decisions that upset the creatives at Disney — particularly when it came to streaming. He had a very public fight with Scarlett Johansson, who sued Disney over potential lost income due to its decision to release Black Widow on its streaming service at the same time the movie was in cinemas.
And while the Johansson fight generated headlines, behind the scenes studio chiefs bristled at their loss of decision-making authority under Chapek’s streaming-first structure. Much of that authority rested with Kareem Daniel, a trusted Chapek ally.
Greenfield said he expected Iger to overhaul Chapek’s streaming structure. “It’s been clear that studio executives have become increasingly furious” about their loss of power, he said.
Sinopec secures one of biggest-ever LNG deals with Qatar
Chinese group agrees to buy more than 100mn tonnes of the fuel over 27 years
China’s Sinopec has secured one of the biggest-ever liquefied natural gas deals, signing a 27-year agreement to purchase 4mn tonnes a year of the fuel from QatarEnergy.
The agreement announced on Monday by the state-owned groups comes as Europe races to secure alternative supplies of natural gas in the wake of Russia’s invasion of Ukraine.
The deal “marks the longest gas supply agreement in the history of the LNG industry”, said Saad Sherida al-Kaabi, QatarEnergy’s chief executive and the Gulf state’s energy minister.
He added that it would “further solidify the excellent bilateral relations between the People’s Republic of China and the State of Qatar and help meet China’s growing energy needs”.
The agreement follows a shorter 10-year LNG purchase arrangement signed in 2021 between QatarEnergy and Guangdong Energy Group Natural Gas Company. Company executives said Monday’s move was likely to be followed by further agreements.
“Sinopec attaches great importance to the co-operation with QatarEnergy, who we regard as a strategic, long term and all-round partner, and we are expecting more co-operation fruits to come,” said Ma Yongsheng, Sinopec’s chair.
Germany has also been pursuing Qatari LNG imports, and the two countries signed an energy partnership in May. However, European nations have hesitated over longer-term deals as they plan to move away from fossil fuels in a shorter timeframe.
“This shows how things have changed in the LNG market and how committed the Chinese are to continue the use of gas in the long run within the energy mix,” said Neil Beveridge, a senior energy analyst at Bernstein, who said it was the longest contract he had ever seen.
“It comes at a time when we have been seeing buyers seeking shorter-term contracts and increased flexibility . . . There is a lot of hesitancy amongst European utilities to commit to longer-term contracts given targets among decarbonisation.”
A 2022 McKinsey survey found Chinese buyers were more confident about the longer-term need for LNG than Europeans who were more uncertain about their requirements after 2025 due to the energy transition and high prices leading to lower demand.
Qatar’s North Field East project began in 2020 with a goal to increase the Gulf state’s LNG export capacity from 77mn tonnes to 110mn tonnes by 2026, putting it in a position to overtake Australia. Shareholders in North Field East, controlled by QatarEnergy, include Shell, ExxonMobil, TotalEnergies, Eni and ConocoPhillips.
Half of North Field East production is expected to go to Europe, and the other half to Asia.
Another phase, North Field South, is slated to boost Qatar’s domestic LNG production to 126mn tonnes by 2027.
Qatar was the world’s second-largest exporter of LNG in 2021, accounting for 20 per cent of global exports, according to BP. However, the US has become the top LNG exporter this year.
“It is a significant LNG deal. It’s one of the largest ever signed,” said Daniel Toleman, Wood Mackenzie’s principal LNG analyst, of Monday’s agreement.
Research Calls
- Upgrades:
- Canadian Natrl Res (CNQ) upgraded to Buy from Neutral at Goldman; tgt raised to $69
- CMS Energy (CMS) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $64
- Comerica (CMA) upgraded to Outperform from Mkt Perform at Raymond James; tgt $85
- Mueller Water (MWA) upgraded to Buy from Neutral at Northcoast
- On (ONON) upgraded to Buy from Neutral at Goldman; tgt lowered to $28
- Walt Disney (DIS) upgraded to Outperform from Market Perform at MoffettNathanson; tgt $120
- Downgrades:
- Alignment Healthcare (ALHC) downgraded to Mkt Perform from Outperform at Raymond James
- American Homes 4 Rent (AMH) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $33
- Aveanna (AVAH) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $3
- Cenovus Energy (CVE) downgraded to Neutral from Buy at Goldman; tgt $23
- Cigna (CI) downgraded to Outperform from Strong Buy at Raymond James; tgt $370
- ConocoPhillips (COP) downgraded to Sell from Hold at Societe Generale; tgt $114
- EverCommerce (EVCM) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $9
- Extra Space Storage (EXR) downgraded to Underperform from In-line at Evercore ISI; tgt lowered to $150
- Federal Signal (FSS) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
- Four Corners Property Trust (FCPT) downgraded to In-line from Outperform at Evercore ISI; tgt $28
- Kimco Realty (KIM) downgraded to In-line from Outperform at Evercore ISI; tgt $22
- MongoDB (MDB) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $215
- Others:
- Affiliated Managers (AMG) resumed with a Buy at Goldman; tgt $182
- Apollo Commercial Real Estate (ARI) resumed with a Neutral at BofA Securities; tgt $12
- Cue Biopharma (CUE) initiated with an Overweight at Piper Sandler; tgt $7
- Alpine Immune Sciences (ALPN) initiated with an Outperform at SVB Leerink; tgt $15
- Cullinan Management (CGEM) initiated with a Buy at BTIG Research; tgt $20
- ImmunoGen (IMGN) initiated with a Buy at Truist; tgt $10
- Mersana Therapeutics (MRSN) initiated with a Buy at Truist; tgt $12
- Mobileye Global (MBLY) initiated with a Buy at Citigroup; tgt $77
- Mobileye Global (MBLY) initiated with a Buy at Goldman; tgt $36
- Mobileye Global (MBLY) initiated with a Buy at Mizuho; tgt $35
- Mobileye Global (MBLY) initiated with a Buy at Needham; tgt $40
- Mobileye Global (MBLY) initiated with a Neutral at BofA Securities; tgt $34
- Mobileye Global (MBLY) initiated with a Peer Perform at Wolfe Research
- Mobileye Global (MBLY) initiated with a Strong Buy at Raymond James; tgt $50
- Mobileye Global (MBLY) initiated with an Outperform at Cowen; tgt $35
- Mobileye Global (MBLY) initiated with an Outperform at RBC Capital Mkts; tgt $41
- MongoDB (MDB) initiated with an Overweight at KeyBanc Capital Markets; tgt $215
Gapping down
In reaction to earnings/guidance:
- NIU -4.8%
Other news:
- SGRY -8.2% (proposes $275 mln offering of common stock)
- COIN -6.2% (cautious Barron's article)
- TGNA -3% (announced the National Telecommunications and Information Administration submitted a filing with the FCC confirming it has no objects to the transaction with Standard General L.P.)
- SI -1.8% (cautious Barron's article)
- BLDR -1.6% (announces CEO transition; Dave Rush appointed interim CEO; reaffirms FY22 guidance)
- AAPL -1.1% (cautious Barron's article)
- ENFN -1% (files $150 mln mixed securities shelf offering; also files for 21,522,009 common stock offering by selling stockholders)
Analyst comments:
- ALHC -1.9% (downgraded to Mkt Perform from Outperform at Raymond James)
Gapping up
In reaction to earnings/guidance:
- J +3%, SJM +1.2%, FUTU +1.1%
Other news:
- IMGO +104.7% (to be acquired by Merck (MRK) for $36.00/share)
- EAF +15.6% (agrees to sell its TitlePoint line of business to Fidelity National Financial for $225 million in cash)
- DIS +8.4% (appoints Robert Iger as CEO)
Analyst comments:
- CMA +1.1% (upgraded to Outperform from Mkt Perform at Raymond James)