A Shareholder Vote Bidding Site Could Sway the Disney-Peltz Proxy War

Disney shareholders are expected to vote on Disney's new board at the shareholder meeting on April 3.

Disney CEO Bob Iger
Bob Iger arriving at the 2024 Oscars Nominees Luncheon Red Carpet at the The Beverly Hilton Hotel in Beverly Hills, Calif. on Feb. 12, 2024. Blackshire / Los Angeles Times via Getty Images

A mysterious shareholder of The Walt Disney Company (DIS) is looking to purchase 500,000 proxy votes for $100,000 from the Magic Kingdom’s other shareholders ahead of next month’s contentious proxy fight between hedge fund billionaire Nelson Peltz and Disney CEO Bob Iger.

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A proxy vote allows a person or a firm to vote on behalf of a company’s shareholder at a shareholder meeting. Usually, if a person wants to buy 500,000 proxy votes, it would cost them around $55 million in stock. However, the Shareholder Vote Exchange (SVE), a California-based startup that provides a platform for shareholders to sell their proxy votes to the highest bidder, reduces this cost significantly. Disney shareholders are eager to sell: already, more than 23,000 proxy votes have been put up for sale on SVE’s platform.

Founded in 2021 by Preston Yadegar, SVE has facilitated the sale of 500,000 proxy votes since launching in May 2023 and “is on track to do much more this year,” chief operating officer Steven Xu told Observer. Yadegar founded SVE a year after his graduation from Boston University and serves as the CEO. Andrew Shapiro, the founder and managing member of Lawndale Capital Management, serves as one of the advisors.

Since January 2023, Peltz, the founder of Trian Partners, has engaged in a proxy fight to gain board seats at Disney. He has received backing from Ike Perlmutter, the former chairman of Marvel Entertainment who sold his company to Disney and remained there until being fired in March 2023. Perlmutter has helped increase Peltz’s Disney stake to 33 million shares, worth around $3 billion.

Iger and the Disney board have encouraged shareholders to vote against Peltz’s bid to join the board and picked up backing from activist hedge fund ValueAct. The shareholder vote to confirm Disney’s new board will take place on April 3 during the company’s 2024 shareholder meeting. As attention builds on ahead of the meeting, Xu said Disney now “easily accounts for a third or even a half of all proxy votes up for sale” on the platform.

Xu did not reveal who the anonymous buyer is, but he confirmed it is a current Disney shareholder rather than an outside player.

While 500,000 proxy votes is a fraction of the total 1.8 billion Disney shares outstanding, it can be enough to sway a proxy war. In 2017, Peltz lost a proxy fight with Procter & Gamble by exactly that many votes, roughly 0.02 percent of the total P&G shares outstanding at the time.

SVE is the first of its kind to create an open platform for trading proxy votes, but the practice is not new. In 2002, Carly Fiorina, the former CEO of Hewlett-Packard, used “vote buying” to get shareholders to approve the company’s merger with Compaq. In a 2005 Harvard Business Review article recounting the events, authors Luh Luh Lan and Loizos Leracleous wrote that vote buying “may be illegal in politics, but in the corporate arena, it is a legitimate, if controversial, strategic tool.”

A Delaware judge ruling on Fiorina’s vote-buying found that the practice did not violate the state’s laws: shareholders have a right to sell their votes, and companies do not have a right to interfere.

A Shareholder Vote Bidding Site Could Sway the Disney-Peltz Proxy War