Major Financial Figure Calls for SEC Investigation of Disney for Alleged Illegal Leaks

Things are starting to line up in a way that makes Disney look very, very badly. Not only do they look badly, but the very proxy vote we are receiving in a few hours will now be tainted. As a result, major financial figures are beginning to call for SEC investigations into Disney and Bob Iger. It's going to get ugly, folks. Not only is it going to get ugly, but it may result in a very harsh future for the company -- not in the next year due to political leanings of the SEC under the current administration. But if Disney faces an SEC next year that is not politically aligned, this could be almost as bad as the Florida situation with them losing in every possible way.

I'd like to break down the message sent out by Bill Ackman on X yesterday. It's amazing. I'll post it in blocs and then provide my thoughts in italics as it goes along:

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There have been a few recent articles in the press about @Disney 'winning' its proxy contest with Nelson Peltz based on early election returns that have been leaked to the media. We don't have an investment in Disney, but I thought it useful to point out the inappropriateness of these leaks to the press. Only the company and its advisors have access to how shareholders have voted before the day of the annual meeting. My understanding is that it is illegal to release the outcome of the vote prior to it being finalized as it has the effect of manipulating the outcome. Here, the company and/or its advisors have leaked that Disney is winning the contest. It is really inappropriate that they have done so.

Bill Ackman is therefore accusing Disney of not only illegally leaking the vote counts, but also faking their outrage at the first leak declaring Peltz in the lead. In other words, he's saying Disney completely manufactured a story of them overcoming Peltz in order to garner more attention from institutional investors on their side at the eleventh hour of the eleventh month.

And how does one know that it is Disney and/or its advisors that are the source of the leak? If Peltz were 'winning,' there would be no leaks to the press. The reason why the progress of an election for directors must be kept confidential until the results are final is that leaking the results can affect the ultimate outcome. Institutional shareholders worry about offending management by voting with an activist. They are concerned that if management learns that they have voted against the incumbent directors, they may lose 'access' to management going forward. In other words, Bob Iger is less likely to come visit and/or take a call with a shareholder if the shareholder voted with the dissident.

The claim here is that the announcement that Peltz was winning with 20% turned (and Trian being part of that 20%) was intended to indicate to investors that it was close but that Disney would likely win. The next leak (allegedly from the same Disney) was intended to indicate that it was close but that Peltz was now losing. The game being played, according to Ackman, is to manipulate the vote so that institutional backers are trying to get on the winning side so they'll have access in the future.

This is clearly a close election. Institutions don't want to risk voting against the incumbent board if it is clear that the activist will lose. They want to be on the winning side of the election. Here, the company and/or its advisors have leaked the early results in order to tip more institutions and other shareholders to vote for the incumbent board, unfairly tipping the scale in the incumbent board's favor. In other words, an institution may think: if Peltz is going to lose, it is not worth taking the risk of offending management by voting for him. This is unfortunately not an uncommon practice. Years ago, in our proxy contest with ADP, the company and/or its advisors did the same thing.

Ackman alleges that ADP attempted to illegally manipulate vote counts against his company in a proxy battle years ago. What is tremendously interesting is that ADP is somewhere between 25-33% the size of Disney. Leaking and manipulating vote counts in a proxy battle of this size -- and especially twice within a 48 hours -- is essentially unprecedented.

The @SECGovshould do a thorough investigation of this proxy contest and appropriately punish whoever is responsible for this miscarriage of shareholder governance and justice. Companies of the caliber of Disney and/or its advisors should not behave this way. Lastly but importantly, I think highly of Nelson Peltz. I am sure he would be greatly additive as a member of the Disney board. Ask yourself, why is the company fighting so hard to keep him off? The fact that the company leaked the early returns to the media is further evidence that an activist of Nelson's caliber deserves to be on this board for all shareholders benefit. Based on my knowledge of Nelson's capabilities and the dirty tricks implemented by the company and its advisors, I strongly recommend that shareholders vote for Nelson Peltz for the Disney board. Institutions who have already voted still have time to change their vote. It is time that we make an example of Disney here so that this bad practice does not continue to poison shareholder democracy.

Very, very strong words. And, unfortunately, if Peltz (or Rasulo) are not on the board after today, it's going to be with a strong feeling of anti-democratic and manipulative methods taken to stop them. In a world where we can't even catch Supreme Court leakers, the chances of the government caring enough to catch the leaker here is infinitesimally small. But perhaps even more damning, it shows that not even corporations can even seem to run fair elections when shareholder legal action is available.

https://twitter.com/BillAckman/status/1775285586078707789

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Your pal,
Pro

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