Disney fail: Company announces cancellation of two big projects, as media pounces to falsely blame DeSantis for one

Shareholders in the Walt Disney Company have a lot to be unhappy about lately. Anyone unlucky enough to have purchased its stock on March 12, 2021, has lost over 52% of their investment at yesterday’s closing price. Simply Wall Street comments:

In the wake of The Walt Disney Company's (NYSE:DIS) latest US$15b market cap drop, institutional owners may be forced to take severe actions[.] (snip)
Significantly high institutional ownership implies Walt Disney's stock price is sensitive to their trading actions
The top 25 shareholders own 38% of the company

And that’s not all. The company announced yesterday that it is abandoning two huge projects, one of which has been operating and is to be closed down – apparently an unsuccessful large investment -- while the other represents a big plan that is being abandoned. The agitprop media focused mainly on the abandoned plan, seeking to blame Florida Governor Ron DeSantis, while comparatively ignoring the existing investment that hasn’t panned out and has to be written off. An insightful article written by Legal Insurrection founder William A Jacobson lists some of the coverage the media pounce:

But, as Jacobson incisively notes:

But if you read the details, the reality is that Disney cancelled one small part of its Florida plans for less than $1 billion, and kept almost all its other plans. And even that $1 billion was not such a sweet deal for Florida, since it was subsidized by over $500 million in tax incentives, and there were doubts that the job growth, which was by transferring employees from southern California, even could happen.

He quotes the misleadingly titled New York Times article on the subject, Disney Pulls Plug on $1 Billion Development in Florida:

The project, known as Lake Nona Town Center, was supposed to cost $864 million, but recent price estimates have been closer to $1.3 billion. Disney had planned to relocate as many as 2,000 employees from Southern California, including most of a department known as Imagineering, which works with Disney’s movie studios to develop theme park attractions.
Most of the affected employees complained bitterly about having to move — some quit — but Disney held firm, partly because of a Florida tax credit that would have allowed the company to recoup as much as $570 million over 20 years for building and occupying the complex.
He cited “changing business conditions” as a reason for canceling the Lake Nona project. “I remain optimistic about the direction of our Walt Disney World business,” Mr. D’Amaro said in the memo. He noted that $17 billion was still earmarked for construction at Disney World over the next decade — growth that would create an estimated 13,000 jobs. “I hope we’re able to,” he said. [emphasis added by Jacobson]
The memo, which was viewed by The New York Times, did not mention Mr. DeSantis. But the company’s battle with the governor and his allies in the Florida Legislature figured prominently into Disney’s decision to cancel the Lake Nona project, according to two people briefed on the matter, who spoke on the condition of anonymity to discuss private deliberations….
A spokesman for Mr. DeSantis said in an email: “Disney announced the possibility of a Lake Nona campus nearly two years ago. Nothing ever came of the project, and the state was unsure whether it would come to fruition. Given the company’s financial straits, falling market cap and declining stock price, it is unsurprising that they would restructure their business operations and cancel unsuccessful ventures.” ….

It also turns out that the canceled project was the baby of the recently removed Disney president and was always opposed by the returning CEO:

“Mr. Iger, who came out of retirement to retake Disney’s reins, was much less enthusiastic about the project — even before the company became mired in its battle with Mr. DeSantis. As soon as he returned to Disney, Mr. Iger began telling lieutenants, for instance, that it made little sense to move Imagineering so far away from Disney’s movie studios. As he is fond of saying, “Creative teams need to be together.”

Lake Nona is a large, upscale planned community southeast of and remote from Orlando proper and a long commute from Disney's theme park and studios. Despite a lush package of incentives for Disney, the move was not popular with the Disney employees and their families who were being forced to relocate from California. For many, it must have seemed like a corporate employer sentencing them to a hot and humid Siberia.

The cancellation of the move has little to do with DeSantis and Florida and, like the termination of the Star Wars hotel, is part of Disney CEO Bob Iger's pruning back of costly missteps by previous management. Behind the headlines, Disney is in trouble because its cost structure became bloated just as intensifying competition, a looming recession, and the baby bust are forcing painful revisions to its business strategy.

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