Dan Loeb’s Chapek Punch List

Dan Loeb
Photo: Larry Busacca/Getty Images
William D. Cohan
August 24, 2022

Unlike say Warren Buffett or Bill Ackman, investors who like to buy and hold until the pain becomes too acute, Dan Loeb has a reputation for being nimble, and opportunistic. He once told me that investing is simply all about figuring out when to do something that’s obvious, and when to do something that’s contrarian. At the outset of the pandemic, for instance, Loeb made what he deemed to be the obvious decision to invest in Disney, telling me it was a “tremendous company” with “a great brand” and he was very excited about being able to buy the stock at a discount that resulted from the negative impact that the quarantine had on the company’s parks, sports rights, cruise business, and theatrical releases. Loeb’s Third Point hedge fund owned stock in Disney worth more than $900 million at its peak, and then ultimately sold out of the position completely earlier this year. Meanwhile, shares in Disney rose around 70 percent between May 2020, about when he bought the first time, and August 2021, when he disclosed his first Disney stake. He made a killing.

More recently, on August 15th, Loeb disclosed that he had taken another bite of the Disney apple, amassing a roughly $750 million stake in the company. This time, however, his money came with a few requests, which he politely yet forcefully articulated in a letter to Disney C.E.O. Bob Chapek. I’ve known Dan for a long time and have written about his financial exploits for years. He lives large (but tastefully), as you would expect of a billionaire hedge fund manager. He’s got an apartment at 15 Central Park West, a home in the Hamptons, a private-jet and a megayacht. He’s a big surfer. (Third Point is named after a break in a favored surfing spot near his hometown of Los Angeles.) He’s got a world-class collection of contemporary art. He’s plenty open-minded, borderline liberal, but he’s also a longtime proponent of charter schools and not much of a fan of the woke curriculum that has overtaken many of the private schools in New York City. And, for a hedge fund manager who has often used activism as a tool, he actually prides himself on being a reasonable guy. He’s not one to hold out for the last dollar.

When you cut through it all, what Loeb really wants Chapek to do is cut Disney’s bloated costs and pay down Disney’s $50 billion of debt. Loeb’s first priority for Disney, at least according to the letter, is that Disney do something about its cost structure. “Disney’s costs are among the highest in the industry, and we believe Disney significantly under-earns relative to its potential,” Loeb wrote. “We urge the Company to embark on a cost cutting program,” to improve profit margins and by selling off “excess underperforming assets.” Of Disney’s nearly $82 billion in revenue for the last 12 months (ending July 2), there were some $69 billion of related expenses, excluding depreciation and amortization. That $69 billion is what Loeb is targeting.