Can Disney do better? – The New York Times

Third Point, the hedge fund led by Dan Loeb, bought a new stake in entertainment giant Disney worth roughly $1 billion, and is pushing for the company to make changes, including spinning off ESPN, taking the Full control of the early Hulu streaming service and installing new board members. So far, Disney has held off on some of those ideas, and Loeb may face resistance without board representatives. (Disney notes that the average tenure for its board members is a quick four years.)

Third Point had just finished a different campaign at Disney. In 2020, he revealed a stake in the company that was worth more than $900 million at its peak and pushed for more to be invested in streaming. He then sold all of his remaining Disney shares in the first quarter of this year.

Disney’s commitment to streaming has paid off. Your main streaming service Disney+ added 14.4 million subscribers in the most recent quarter, far more than Wall Street expected. Disney’s strong performance in a business that is increasingly driving the entertainment industry, even as other streaming companies have struggled, has created safer territory for Loeb to launch a campaign, with less risk of it going off the rails as Bill Ackman’s investment in Netflix was. Still, Disney shares are down about 20 percent since the start of the year, underperforming the S&P 500, in part due to broader industry concern about the profitability of direct-to-consumer streaming.

ESPN is in Loeb’s sights. Analysts and bankers have long speculated that Disney could spin off the sports network and its related businesses, which have grown much faster than much of the rest of its portfolio.

But Disney has reasons to keep it. ESPN is a profit engine for the company that helps offset losses as it pours money into streaming. In February, Disney CEO Bob Chapek appeared to try to temper expectations that he might part ways with ESPN, speaking of the brand’s future and expressing excitement about a possible entry into sports betting. The sports network also holds Disney’s portfolio of cable channels together. But that business is in steep decline: 8.2 percent of all traditional cable customers in the US canceled their connection in the second quarter, according to a recent Wells Fargo report.

Loeb also wants faster action on Hulu. Disney said in 2019 that it would acquire Comcast’s one-third stake in the streaming service, which was started as a joint venture, for at least $5.8 billion over the next few years. Loeb wants Disney to buy that stake earlier, before the 2024 contract deadline, to help strengthen his push toward streaming.

But that could be expensive. Loeb acknowledges that Comcast may not be willing to sell at a reasonable price, particularly as it seeks to bolster its own streaming business, Peacock. Analysts have estimated that buying Comcast’s stake in Hulu would cost at least $9 billion.

Apple wants employees back in the office three days a week, beginning in early September. Chief Executive Officer Tim Cook told employees the move was “a pilot” but stressed there was a need to boost the “in-person collaboration that is so essential to our culture.” The tech giant is also cutting hiring and spending, recently laying off about 100 recruiters.

A top Trump executive is closing in on a plea deal. Prosecutors had long hoped to turn the tables on Allen Weisselberg, Trump’s longtime chief financial officer, who faces tax evasion charges that could carry a 15-year prison sentence. But Weisselberg, who is expected to plead guilty in exchange for a significantly reduced sentence, does not appear to have given prosecutors evidence implicating the former president or his family in a crime.

“Smart money” gets rid of stocks. In the set of second-quarter reports due yesterday, hedge funds Tiger Global, David Tepper’s Appaloosa Management and Scion, run by “The Big Short’s” Michael Burry, significantly cut their equity holdings as fears of recession took hold of the markets. University fund managers at Princeton and Yale made similar bearish bets. But Warren Buffett’s Berkshire Hathaway snapped up depressed shares in Apple and George Soros did the same for Amazon.

Peloton spins a DIY redesign in time for Christmas. Barry McCarthy, the stationary bike maker’s chief executive, told Bloomberg that he is considering a number of cost-cutting measures to turn around the company, including shipping bikes to customers in kit form. Peloton has already raised prices and closed some factories, but its shares have fallen more than 60 percent this year.

Home Depot and Walmart exceeded expectations. The two big retailers reported better-than-expected sales and profits, even as higher inflation and a shift in spending toward services have hit retailers this year. Walmart shares rose in early trading, even as the company reiterated its expectation that consumers would continue to cut back on spending this year.

During the worst of the pandemic, when the virus forced businesses to close their doors, Congress and federal agencies provided about $5 trillion in relief money in three legislative packages aimed at keeping the economy afloat.

With a giant accident to avoid, the money came with few strings attached and minimal oversight. The programs, which expanded unemployment benefits, paid businesses to keep workers on their payrolls and also expanded a type of disaster loan, were all designed around the honor system. The result: a massive wave of fraud, quite likely the largest in US history, in which billions of dollars were stolen by thousands of people, reports David A. Fahrenthold of The Times.

Some of the strangest and seemingly transparent schemes:

  • Twenty-nine states paid unemployment benefits to the same person.

  • A Postal Service employee took out a loan of $82,900 for a business called “US Postal Services.”

  • Someone got 10 loans for 10 nonexistent bathroom renovation businesses, using the email address of a burrito shop.

Two years later, authorities are still investigating tens of thousands of additional cases of fraud. There are 500 people working on pandemic fraud cases at nearly two dozen government agencies, in addition to investigators from the FBI, the Secret Service, the Postal Inspection Service and the Internal Revenue Service. Labor Department agents alone are still working on some 39,000 cases. The Small Business Administration is investigating two million loan applications. And that’s on top of the 1,500 people who have already been charged with defrauding pandemic relief programs. More than 450 people have been sentenced.

“We have years and years and years of work ahead of us,” said Kevin Chambers, the Justice Department’s chief pandemic prosecutor.


Ethan Zuckerman, professor at the University of Massachusetts Amherst and owner of a Chevrolet Bolt, on the surprising lack of a national plan for charging electric vehicles. A recent study in the Bay Area found that almost a quarter of public charging stations were not working.


Blockchain advocates are preparing to fight back after the Treasury imposed sanctions last week on Tornado Cash, a cryptocurrency “mixer” that obfuscates the trails of digital currencies, and prosecutors in the Netherlands arrested one of its developers.

Mixers hide the source of crypto assets, which could violate money laundering laws. U.S Officials say Tornado Cash failed to “impose effective controls designed to prevent it from laundering funds for malicious cyber actors,” including state-sponsored North Korean hackers. Cryptocurrency advocates say Tornado simply offers computer code that anyone can implement, for better or worse.

The moves could threaten the future of cryptocurrencies. US sanctions apply to Tornado smart contracts, which are automatically executed when certain conditions are met. It is the first time the US government has applied regulation directly to a software protocol, according to Miller Whitehouse-Levine, policy director at crypto lobby group DeFi Education Fund.

“What everyone fears,” he told DealBook, is that authorities could start regulating autonomous protocols more broadly. The developers and supporters of Tornado Cash say that no one controls their code, and that’s by design.

The Treasury Department “has exceeded its legal authority” argued Jerry Brito and Peter Van Valkenburgh of the advocacy group Coin Center: “How can it be right to add to the sanctions list not a person or a person’s property, but an automated protocol that is not under anyone’s control? ” The government action is already having a chilling effect on software development, advocates say, and they are considering a constitutional challenge on free speech and due process grounds. (Treasury did not respond to a request for comment on Coin Center’s analysis.)

“Is it illegal to write open source code now?” co-founder of Tornado Cash, Roman Semenov, he asked on Twitter last week, after his account on code sharing platform GitHub was suspended. Semenov has argued that Tornado Cash is not under the control of its developers. Still, the Treasury has vowed to “continue aggressive action” and Dutch prosecutors are not ruling out future arrests. Therefore, decentralization may not provide the immunization against legal dangers that the industry has relied on. And that has some analysts predicting more bad news soon.

offers

  • Failed crypto lender Celsius may run out of cash faster than expected, and a court filing reveals it owes creditors $2.8 billion. (Coin desk)

  • Tencent plans to divest all or most of its $24 billion stake in Chinese food delivery company Meituan. (Reuters)

  • Elliott Management and SoftBank appear headed for a split. The hedge fund plans to sell almost all of its $2.5 billion in the tech investment company. (FOOT)

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Bernhard Warner contributed to today’s DealBook.

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