Hedge fund manager Michael Burry is potentially making another bet that a part of the investing world has gotten too hot, just as he did with the broader stock market earlier this year and with the housing market more than a decade ago. Burry’s Scion Asset Management has a put position against 100,000 shares in the iShares Semiconductor ETF (SOXX) , according to a securities filing representing the end of the third quarter released Tuesday. The exact value of the options position is not known, but the notional value of the ‘SOXX’ shares involved was more than $47 million at the end of the quarter. It is also not known whether Burry still holds the position or whether it’s some sort of hedge against a long position. A put option gives investors the ability to sell the underlying asset at a predetermined price. The date of expiration and the strike price of the put position were not disclosed. One put contract typically covers 100 shares of the underlying stock or ETF, so Burry’s position is likely 1,000 put contracts. The SOXX is up more than 30% year to date, and its top holdings include Advanced Micro Devices , Broadcom and Nvidia . SOXX YTD mountain Semiconductor stocks have rallied sharply in 2023. Burry also closed out previous put positions against the S & P 500 and the Nasdaq 100 during the quarter, according to securities filings. Those positions were winners for Burry as the stock market finished the third quarter lower. Burry is one of several hedge fund managers who correctly identified the housing bubble ahead of the 2008 financial crisis. His actions at that time were captured in the Michael Lewis book “The Big Short” and the movie of the same name. Burry closed his previous hedge fund, known as Scion Capital Management, after the financial crisis. The newer Scion Asset Management does also hold long positions on stocks, including a $7.7 million position in Stellantis and a stake in Nexstar Media Group worth just under $7 million, according to the filing. The hedge fund filings do not show all types of derivatives or private investments, so the full scope of Burry’s positions are unknown.
Chief executive officer of The Walt Disney Company Bob Iger and Mickey Mouse look on before ringing the opening bell at the New York Stock Exchange (NYSE), November 27, 2017 in New York City.
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Usually when a person or company sells something, the primary motivation is getting back as much money as possible.
Disney‘s motivation to potentially sell ABC and its owned affiliates, linear cable networks and a minority stake in ESPN isn’t predicated on what these assets will fetch in a sale. It’s about signaling to investors the time has come to stop thinking about Disney as old media.
Disney’s market capitalization is about $156 billion. The company has about $45 billion in debt. Selling assets can help the entertainment giant lower its leverage ratio while buffering the continued losses from its streaming businesses.
Still, that’s not the prime rationale for why Disney Chief Executive Bob Iger told CNBC in July he’s contemplating selling off media assets — something he’s long resisted. Rather, a sale of ABC and linear cable networks would be a message to the investment community: The era of traditional TV is over. Disney is ready for its next chapter.
“Disney almost has a good bank and a bad bank at this point,” Wells Fargo analyst Steven Cahall said in a CNBC interview. “Streaming is its future. It’s its strongest asset, next to the parks. The linear business is something Disney has clearly signaled is going to be in decline. They’re not looking to necessarily protect it. If they can move some of that lower, negative-growth business off of the books and to a better, more logical operator, we think that’s good for the stock.”
Nexstar has held preliminary conversations with Disney to acquire ABC and its owned and operated affiliates, Bloomberg reported Thursday. Media mogul Byron Allen has made a preliminary offer to pay $10 billion for ABC and its affiliates along with cable networks FX and National Geographic, according to a person familiar with the matter.
Disney released a statement Thursday saying “while we are open to considering a variety of strategic options for our linear businesses, at this time The Walt Disney Company has made no decision with respect to the divestiture of ABC or any other property and any report to that effect is unfounded.”
The value of broadcast and cable networks has significantly declined from the 1990s and early 2000s as tens of millions of Americans have canceled cable in recent years.
Cahall values ABC and Disney’s eight owned affiliate networks at about $4.5 billion. That’s a far cry from the $19 billion Disney paid for Capital Cities/ABC in 1995 — the deal that brought Iger to the company.
ESPN has a valuation of about $30 billion, according KeyBanc Capital Markets analyst Brandon Nispel, “though we view it as a melting iceberg,” he added in a September note to clients. LightShed analyst Rich Greenfield values ESPN at closer to $20 billion.
Disney would like to keep a majority stake in ESPN, Iger told CNBC. It currently owns 80% of the sports media business, and Hearst owns the other 20%.
Disney’s most interesting decision may be deciding what to do with the ABC network. The company can easily sell off its eight owned and operated affiliate stations — located in markets including Chicago, New York and Los Angeles — without changing the trajectory of the media industry.
But divesting the ABC network would be a bold statement by Disney that it sees no future in the broadcast cable world of content distribution.
Selling ABC would be particularly jarring given Iger’s comments both to CNBC and in Disney’s last earnings conference call that he wants the company to stay in the sports business.
“The sports business stands tall and remains a good value proposition,” Iger said last month during Disney’s third-quarter earnings conference call. “We believe in the power of sports and the unique ability to convene and engage audiences.”
There’s clear value, at least for the next few years, in keeping a large broadcast network for major sports leagues. NBCUniversal executives hope ownership of the NBC network will convince the NBA that it should be cut into a new rights agreement to carry NBA games. NBC is a free over-the-air service and can increase the league’s reach, they plan to argue. Even if the world is transitioning to streaming, millions of Americans still use digital antennas to watch TV.
Currently, ESPN and ABC split sports rights. Selling ABC may trigger certain change-of-control provisions that force existing deals with pay TV operators or the leagues to be rewritten, according to people familiar with typical language around such deals.
Moving on from the network also may obstruct ESPN’s ability to land future sports rights deals. Without ownership of ABC, leagues may choose to sell rights to other companies, thus further weakening ESPN.
If Iger is true to his word and Disney stays in the sports broadcasting business, the company will have to weigh the negative externalities of losing ABC with the positive gains of showing investors it’s serious about shedding declining assets.
“Obviously, there’s complexity as it relates to decoupling the linear nets from ESPN, but nothing that we feel we can’t contend with if we were to ultimately create strategic realignment,” Iger said last month.
If Disney does land a deal to sell ABC, and investors cheer the move, it may also function as a catalyst for other large legacy media companies to sell their declining assets. NBCUniversal, Paramount Global and Warner Bros. Discovery all have legacy broadcast and cable networks in addition to their flagship streaming services.
Disney may become the leader in pushing the industry forward.
“We see this as a real bullish sign at Disney.” said Cahall. “There’s a lot going on now at Disney, between ESPN and partnerships and divesting some of this stuff. Disney is suddenly feeling a little more catalyst-rich than it was recently.”
– CNBC’s Lillian Rizzo contributed to this article.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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