Walt Disney Co. sold $1 billion in two- and three-year notes Monday, but the move didn’t soften the company’s fall in trading, as it dipped 18% — the second biggest showbiz drop that day.
The Burbank-based conglom bought the notes in a move aimed at showing confidence in the markets. Chief financial officer Thomas Staggs said the debt sale was timed to show its faith that securities markets will prove resilient in the wake of last week’s tragic events.
It repped the first corporate bond sale since terrorist attacks on the World Trade Center and the Pentagon. “I wouldn’t have been in the market today but for the events of last week,” Staggs said.
Investor confidence in Mouse shares was less committed, however, largely because Disney will likely take at least a twofold earnings hit in the short term. Diminished tourism will slow traffic at its theme parks, resorts and cruise ship operations, and the Alphabet web will feel the loss of ad revenue during commercial-free news programming about the terrorist attacks.
Overall U.S. advertising is expected to fall 5% to $214.1 billion, compared with a slimmer 1% decline that had been previously forecast, ABN Amro analyst Spencer Wang wrote in a new report.
First Union Securities analyst Scott Davis, citing theme park concerns, downgraded the stock to “buy” from “strong buy” on Monday.
“Everyone was already assuming that 2001 was a writeoff year as far as advertising and that in 2002 ad spending would become more normal,” Davis wrote in a report to investors. But he added that Disney and other media/entertainment stocks could prove of good value to longer-term investors.
Credit Lyonnais analyst Richard Read reiterated a “buy” rating on Disney shares Monday.
Disney, one of only 30 stocks included in the blue-chip Dow Jones Industrial Average, had been planning to raise money, possibly through a bond sale. But Staggs said the timing was important as a good-faith gesture.
Company shares, which traded 15%-20% lower on the New York Stock Exchange throughout the first active session after the terrorist attacks, closed down $4.33, or 18%, to $19.25.
(Bloomberg News contributed to this report.)