Gavin Doyle used allowance money in 2009, when he was 11, to buy a few shares of Disney stock. They cost $31 apiece.
He now owns a little over 400 shares — barely enough to be a speck of dust in the Disney investor galaxy. But the entertainment company, which has 1.8 billion shares outstanding, has nonetheless barraged him for months with political-style campaign materials (letters, email, social media ads) that urge him to elect certain people to its board.
“I guess every vote matters,” said Mr. Doyle, 26, who runs MickeyVisit, a blog unaffiliated with Disney that focuses on theme park vacation planning.
In most cases, global companies pay little attention to individual shareholders. Powerful institutional investors like mutual funds and index funds typically run the show. But Disney finds itself in an atypical situation as it scrambles to thwart Nelson Peltz, an activist investor who is seeking two board seats, including one for himself.
Up to 40 percent of Disney shares are held by individuals — retail investors, as Wall Street sometimes refers to them, with a hint of derision. On average among public companies, individuals represent closer to 15 percent of the ownership, according to analysts and academic studies.
“In the retail market, a lot of individuals don’t feel comfortable investing in companies they’ve never heard of,” said David Reibstein, a professor at the Wharton School at the University of Pennsylvania. “Disney is known: I can relate to it, I have taken my kids there, I’ve seen their movies.”
In other words, the Disney-Peltz proxy battle, expected to be one of the most expensive in history, may be decided by the little people.
Disney’s fight with Mr. Peltz will come to a head on Wednesday, when the company is scheduled to virtually host its annual shareholder meeting. A smaller activist investor, Blackwells Capital, is also seeking seats on Disney’s board, to the company’s irritation. While Mr. Peltz and Blackwells have sharply different views on how Disney should be managed — one wants “Netflix-like margins” of up to 20 percent in streaming, the other has floated splitting up the company — they have expressed the same basic motivation: Disney’s stock price is not high enough.
Shares are trading at about $122, down from $197 three years ago.
Robert A. Iger, Disney’s chief executive, and the company’s 12-member board have responded to the insurgents like Avengers battling Thanos — that is, with startling force. They say a 13-month-old turnaround plan has taken hold, and point to drastically improved financials, a new strategy for ESPN in the streaming age and a retrenchment at Marvel Studios to improve movie quality, among other initiatives. Yes, Disney’s stock is down from three years ago, but it’s up from $81 six months ago.
Disney executives contend that Mr. Peltz’s campaign is rooted in revenge. He is backed by Ike Perlmutter, the disgruntled former chairman of Marvel Entertainment, and aligned with Jay Rasulo, a former Disney executive who was passed over for the top job in 2015 and resigned. Elon Musk, who has been throwing elbows at Mr. Iger since November, when Disney and other major companies paused spending on X, has cheered on Mr. Peltz.
At first, Disney seemed poised to easily defeat Mr. Peltz. A parade of prominent shareholders (George Lucas, Laurene Powell Jobs), business titans (Jamie Dimon), analysts (Guggenheim, Macquarie), shareholder advisories (Glass Lewis, ValueEdge) and Disney family members (Abigail E. Disney) have advised against giving Mr. Peltz seats on the company’s board.
But it has evolved into a much closer contest. Two weeks ago, an influential proxy firm, ISS, partly sided with Mr. Peltz, recommending that shareholders elect him to the board and advising against adding Mr. Rasulo. ISS largely cited Disney’s botched succession planning. On Tuesday, Mr. Peltz won the backing of Egan-Jones, another advisory firm.
Until ISS weighed in, “I was pretty sure that Peltz was kind of cooked,” said Michael Levin, an independent activist investor and adviser who oversees the Activist Investor website. Mr. Levin estimated that ISS’s recommendation could influence 5 to 10 percent of Disney’s vote, with institutional shareholders like Vanguard and BlackRock likely to pay close attention.
Mom-and-pop shareholders are more of a mystery. Retail investors are frequently apathetic, even in the face of a contest, proxy experts say. “You have to find a way to connect with somebody who doesn’t have a requirement to vote, who doesn’t necessarily have it within their routine,” Bruce Goldfarb, the chief executive of Okapi Partners, a proxy solicitation firm working with Mr. Peltz, said at a recent conference.
Disney and Mr. Peltz have each been spending heavily to get out the small-fry vote. Trian Partners, Mr. Peltz’s investment firm, said in a securities filing that it expected to spend about $25 million in total on its campaign; it hired Okapi and another firm, D.F. King, to help identify shareholders and encourage them to vote. Disney, which has teamed with the firm Innisfree M&A, among others, has priced its countercampaign at up to $40 million.
In part to appeal to individual shareholders, Disney has deployed characters like Moana and Iron Man to solicit votes. In February, the company released an animated video starring Donald Duck’s uncle, Professor Ludwig Von Drake. “Voting this year is critical no matter how many or how few shares you may own,” a narrator says. “Do not vote for the Trian Group or Blackwells’ nominees.”
Mr. Peltz responded with a letter to Disney shareholders that included a cartoon showing bored and haggard board members and a messy bowl of noodles. “Spaghetti on the wall will not feed shareholders starved of returns” was the letter’s headline.
Douglas Chia, the president of Soundboard Governance, which advises on corporate governance, got calls from both sides of the battle. Mr. Chia, who says he owns a couple hundred shares of Disney, said he was left unimpressed by the first call on Trian’s behalf. (Mr. Chia conceded that his professional background trained him to ask questions a traditional retail investor might not.)
After he posted about it on LinkedIn, he got a follow-up call from Trian directly, underlining just how much each side is paying attention to every vote.
“These were very senior people at Trian who talked to me for about 45 minutes,” Mr. Chia said. “And it’s like: The meeting is less than a week away — they could be on the phone with BlackRock.” (Mr. Chia said he was not persuaded by Trian’s arguments, but appreciated the follow-up call.)
Retail investors tend to side with management in proxy contests. In the case of Disney, many of these shareholders are fans.
Cori Borgstadt has been a Disney stockholder since 2008, when her grandmother gave her a single share for Christmas. She was 3. Ms. Borgstadt, who has continued to acquire shares, said she had read a few news articles about the proxy contest but had largely disregarded Trian’s case.
“I admire Bob Iger, and I trust him to know what’s right,” Ms. Borgstadt said. “So I voted the white slate.” (Each side has a ballot — white for Disney, blue for Trian.)
Still, experts say there is one big factor in Disney’s fight that may affect the instinct of fans to support Mr. Iger. It involves politics.
Disney has become a political punching bag in recent years, partly because it has added openly gay, lesbian and queer characters to its animated movies. The emphasis on diversity in some of Disney’s live-action films, including “The Little Mermaid” and “The Marvels,” has also led to fan complaints. Although Disney has also received positive reactions, the blowback — and poor ticket sales for some of the films in question — has prompted Disney to retrench.
In what some proxy solicitation experts viewed as an appeal to disenfranchised Disney fans, Mr. Peltz recently waded into the “woke Disney” debate by commenting about “The Marvels,” which focused on female superheroes, and “Black Panther,” which had an all-Black principal cast.
“Why do I have to have a Marvel that’s all women? Not that I have anything against women, but why do I have to do that?” Mr. Peltz told The Financial Times. “Why can’t I have Marvels that are both? Why do I need an all-Black cast?”
The move could “backfire against him — there’s presumably a lot of Disney investors who support diversity in the content,” said Scott Bisang, a partner at Collected Strategies, a communications firm. “But I don’t think he would be doing that unless he thought there was sort of a supportive audience for it.”
Mr. Peltz has been victorious in proxy fights with retail investors before. In 2017, he won what was then the most expensive proxy fight in history at Procter & Gamble with a margin of about 0.0016 percent. (The sides spent about $60 million, or $77 million in today’s money.)
But he lost a hotly contested proxy contest with DuPont in 2015, with studies citing retail investors as one reason.
As Mr. Peltz said in a January securities filing detailing some of Trian’s outreach to Disney shareholders, “Every vote counts!”
Audio produced by Jack D’Isidoro.
