Third Point unveils RH position, urges more action at Disney

2:01 pm Friday, August 06th, 2021

By Svea Herbst-Bayliss

NEW YORK (Reuters) – Daniel Loeb’s hedge fund, Third Point, told investors on Friday that it made a new bet on upscale home goods retailer RH and is urging management at Walt Disney Co to do more to unlock the full potential of its streaming service.

Loeb wrote in a letter to investors that was seen by Reuters that he is confident RH, formerly known as Restoration Hardware, will deliver quick earnings growth and expand abroad under the guidance of Chief Executive Officer Gary Friedman, whom he called a “once-in-a-generation leader.”

The billionaire investor also urged Disney’s management team to take more action to maximize the potential of its streaming platform, suggesting an “all-you-can eat approach to its direct-to-consumer offering.”

Loeb, who has often been critical of chief executives, praised Disney’s leaders for past moves, including suspending the company’s dividend in the first half of fiscal 2020.

His investment in Disney, unveiled roughly a year ago, has been paying off, Loeb said, as his optimistic view of Disney’s streaming service is being proven correct. The company’s stock price has climbed 70% since May as Disney+ streaming now generates over $15 billion in annual revenue from a base of 159 million subscribers.

Yet work lies ahead, the letter suggested.

“While the progress thus far has been commendable, even more can be done to realize Disney’s full potential in streaming,” Loeb wrote.

For example the company could offer its various content on a single platform under the Disney+ brand, “where all theatrical content is available day-and-date with no additional fee to subscribers,” he wrote.

Disney’s chief executive officer and chief financial officer have impressed Loeb and his team with their “relentless pursuit of long-term value creation,” and have “done what is right for customers.”

But “establishing a durable leadership position in the competitive global streaming market will require tough choices, aggressive investment, unwavering focus and consistent innovation,” he wrote.

Third Point gained 15.2% during the first half of 2021.

(Reporting by Svea Herbst-Bayliss; Editing by Steve Orlofsky)