Disney Faces $105M Investment Pullout from South Carolina Amidst Allegations of ‘Structural Rot’

By: Georgia | Published: Dec 18, 2023

South Carolina has made a significant financial decision, withdrawing $105 million in investments from The Walt Disney Company.

This action comes amid concerns voiced in an interview with Fox Business Digital by State Treasurer Curtis Loftis regarding what he describes as a ‘structural rot’ within the company.

Elon Musk Criticizes Disney CEO

In a post on X, formerly known as Twitter, Tesla CEO Elon Musk has publicly called for the dismissal of Disney CEO Bob Iger. This criticism from a prominent business leader adds to the mounting scrutiny Disney is facing.

Elon Musk in a suit and tie appears in focus, looking to the side with a thoughtful expression. In the foreground, the back of a person in a dark suit is visible, and other individuals are seen blurred in the background at an outdoor event

Source: Wikimedia Commons

The combination of Musk’s statement and South Carolina’s financial withdrawal suggests increasing pressure on Disney’s leadership and corporate direction.

Reasons Behind South Carolina's Withdrawal

According to State Treasurer Curtis Loftis, the decision to divest from Disney is attributed to the company’s management allegedly abandoning their fiduciary responsibilities.

Curtis Loftis in a dark suit, white shirt, and patterned tie stands in front of a red sports car adorned with racing decals and the word 'PLAYOFFS.' The car is parked outdoors with trees and a building in the background

Source: S.C. State Treasurer's Office/X

Loftis expressed his concerns about the internal issues at Disney in a statement to Fox Business Digital, highlighting perceived problems in corporate governance and management.

The Financial Impact: $105 Million in Disney Securities

The South Carolina Treasurer’s Office will not renew $105 million worth of Disney debt securities upon their maturity.

The iconic Mickey Mouse Ferris wheel, with a bright smiling Mickey face at the center, stands tall against a clear sky, flanked by a colorful roller coaster track and the wooden structure of a second coaster

Source: Tyler Nix/Unsplash

This decision reflects a significant change in the state’s investment portfolio and potentially has wider implications for how public funds are managed in relation to corporate governance and social responsibility.

Criticism of Disney's ESG Criteria

Loftis has criticized Disney’s adoption of Environmental, Social, and Governance (ESG) criteria.

Bronze statue of Walt Disney holding hands with Mickey Mouse, both smiling and appearing to wave, with a fairy tale castle blurred in the background

Source: Steven Lozano/Unsplash

He argues that this approach diverges from traditional investment principles and does not align with the state’s investment strategy.

Concerns Over Disney's Leadership and Performance

Loftis has expressed concerns over the cultural and managerial shifts within Disney.

Bob Iger stands at a podium with the 'D23 expo' logo, addressing an audience in a dimly lit room

Source: Wikimedia Commons

He links these changes to the company’s recent performance issues, indicating a belief that the current leadership and corporate culture are contributing factors to Disney’s financial challenges.


Disney's Stock Performance Analysis

Despite South Carolina’s divestment, Disney’s stock has shown some resilience, with a nearly 4% rise year to date.

An angled view of a digital stock market display showing 'The Walt Disney Company' with stock prices

Source: Getty Images

However, it remains more than 50% below its all-time high, suggesting a volatile period for the company. This fluctuation in stock price is helpful in understanding Disney’s current market position.


Disney's Financial Recovery Signs

Despite recent criticisms and financial challenges, Disney reported a revenue increase of 5% year over year in the fiscal quarter ending September 30.

Exterior view of a Disney store designed like a whimsical castle with musical notes and Disney characters depicted playing instruments above the entrance. The bold red 'Disney store' sign is displayed prominently against the playful backdrop

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The company’s adjusted earnings per share have also improved, indicating some level of financial resilience amidst the ongoing controversies and market pressures.


Loftis on the Impact of Divestment

Speaking in a separate interview with Fox Business, Loftis has stated that South Carolina’s exit from Disney investments is not expected to cause significant harm to the company.

Roadside view of a green highway sign reading 'South Carolina STATE LINE Chesterfield County' with a winding rural road in the background

Source: Clint Patterson/Unsplash

He emphasizes the importance of making investment decisions based on principles and believes there are ample investment opportunities elsewhere that align better with the state’s criteria.


Disney’s ESG Strategy and Challenges

In its 2022 annual report, Disney acknowledged uncertainties around achieving its ESG goals. The company is aware that integrating these goals into its business may affect its financial performance.

A nighttime spectacle of fireworks bursting in the sky above the illuminated Disney castle, with hues of blue lighting and a smoke-filled background

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This admission reflects the challenges and complexities associated with incorporating ESG criteria into corporate strategy.


Analysts' Perspectives on Disney Stock

Despite the controversies and challenges, analysts from JPMorgan and Bank of America maintain positive outlooks on Disney stock.

A detailed view of a stock exchange market board showing various stock prices with green and blue digital numbers indicating current trading values and percentages

Source: Wikimedia Commons

Their ratings suggest a belief in the company’s potential for recovery and growth, despite the current hurdles and the recent divestment by South Carolina.


The Future Outlook for Disney

The recent events, including South Carolina’s divestment and the criticisms from business leaders like Elon Musk, put Disney in a spotlight of scrutiny and speculation.

Close-up view of a black Mickey Mouse ear hat with a bright orange patch featuring Mickey's smiling face and the 'Walt Disney World' logo

Source: Brian Mcgowan/Unsplash

With mixed financial indicators and ongoing debates about its corporate direction and ESG strategy, the future of Disney remains a topic of interest and analysis in the business world.