Walt Disney Company's (DIS) proxy battle has intensified ahead of the shareholder meeting next month, and an entity is seeking to buy 500,000 votes on Shareholder Vote Exchange as competing sides try to garner support for their board nominees.

The proxy battle between Disney and Nelson Peltz’s Trian Fund Management has been going on for quite some time now. Last month, Blackwells Capital also officially joined the battle, making it a three-way fight. As for buying shareholder votes ahead of the annual meeting, we don’t know for sure whether the shareholder looking to buy them sides with Peltz, Blackwells Capital, or Disney CEO Bob Iger.

Here’s what the three parties have to offer to revive Disney’s fortunes after the stock’s perennial underperformance against the S&P 500 Index ($SPX) over the last decade.

Bob Iger Is Trying to Turn Around Disney

Given the significant underperformance, Disney presented a “fertile ground” to activist investors. In fact, long before Peltz sought seats on Disney's board, in Q4 2022, the company replaced its then-CEO Bob Chapek with his predecessor Bob Iger, as streaming losses ballooned.

Iger has been trying to turn around the company ever since, and Disney has called upon shareholders to vote for its board nominees. To be sure, things have indeed improved at Disney following Iger's return for a second stint with the company.

For instance, on VoteDisney.com, Disney highlights the following:

• The company expanded its cost cuts by $2 billion to $7.5 billion.
• Operating income rose from $3 billion to $3.9 billion between fiscal Q1 2023 and fiscal Q1 2024.
• Its streaming losses, which were making some shareholders wary, narrowed to $0.1 billion in fiscal Q1 2024 as compared to $1.0 billion in the corresponding quarter last year.

Notably, Disney shares surged following the company’s fiscal Q1 2024 earnings last month. It announced a 50% increase in the semi-annual dividend and a $3 billion share buyback program – its first since 2018.

It also announced the launch of a sports streaming platform jointly with Fox and Warner Bros. Discovery (WBD), while reiterating the 2025 launch of an ESPN streaming service. Additionally, the company announced a $1.5 billion investment in Epic Games, publisher of the globally popular video game Fortnite.

Selecting the board nominees proposed by Disney would ensure continuity in the company’s transformation. To be sure, the market’s reaction to Iger’s transformation has been mixed at best. The stock did soar when Disney brought him back, but has subsequently pared gains - and while DIS eventually managed to close in the green last year, it ended up underperforming the markets. That said, the stock did show traction towards the end of last year, and has continued its uptrend in 2024, where it is outperforming the markets.

How Peltz Intends to “Restore the Magic” at Disney

Earlier this month, Peltz released a 133-page memo on what needs to be done to “restore the magic” at Disney. Here are some of the key takeaways from the long memo.

• Disney should cut down on sequels, focus on new movie properties, and reclaim its lead in animated movies.
• Disney should fix its succession process and align executive pay with the company’s performance.
• Additionally, the plan calls for exploring “strategic partnership(s) for non-core linear assets” and a “digital strategy for ESPN that has a clear path to attractive financial returns.”
• Peltz wants Disney to “refine” its Parks strategy and provide return targets for the $60 billion capex that the company has proposed for the segment over the next decade.
• The activist investor also wants Disney to provide a roadmap to reach “Netflix-like margins” (NFLX) in its streaming business. His plan also calls for Disney to provide a free cash flow target beyond the current fiscal year.

Meanwhile, according to Disney, “Over the past 18 months, Mr. Peltz has resurfaced old ideas which have been considered and dismissed, suggested actions that already were in motion, or proposed ideas that demonstrate a complete lack of understanding of the media ecosystem.”

To be sure, some of the ideas - like cutting down on sequels, and the ESPN digital platform - are already been worked by Disney. Also, the company's streaming losses have narrowed significantly, and Disney expects the business to become profitable by the end of this fiscal year.

Blackwells Capital Proposes Splitting Up Disney

While Iger and Peltz haven’t really enjoyed the best relations, Blackwells Capital termed the Disney CEO a “gifted leader,” while adding that even he would require “oversight and accountability.”

This activist investor is not looking to rock the boat, though, and said its nominees for Disney board “have pledged to continue to support Disney’s transformation efforts under the leadership of the current Board and CEO.”

Instead, Blackwells proposes splitting Disney into three entities - sports, entertainment, and resorts - and emphasizes, “Disney may simply be too complex for any one successor to Mr. Iger to manage holistically.” It also suggests that Disney could consider spinning off its burgeoning real estate holdings into a REIT, and estimates that these assets account for 44% of the company’s market cap. According to Blackwells' calculations, Disney’s sum of the parts valuation is much higher than the current consolidated value.

Incidentally, what’s common between Disney and Blackwells is their disdain for Peltz. According to Blackwells, Peltz “has not offered a single strategic idea that would benefit shareholders.”

All in all, the Disney proxy battle might continue to turn ugly over the next couple of weeks, as all sides try to shore up support for their board nominees - including by bidding for shareholder votes, as we are seeing on Shareholder Vote Exchange, where over 27,000 voting rights have been already bid for sale.