Walt Disney Co. shares took a hit on Wall Street after the company’s succession plan for Chief Executive Robert Iger was thrown into question.
The stock lost $1.68, closing at $97 for a loss of 1.70 percent Tuesday, the day after the Los Angeles-area entertainment giant said its chief operating officer and Iger’s heir apparent, Thomas Staggs, is leaving the company.
Monday’s announcement shocked Wall Street analysts, who had gotten to know Staggs well during his tenure as Disney’s chief financial officer.
Staggs’ elevation to the COO post last year was widely seen as laying the groundwork for him to take over for Iger in 2018. He ran Disney’s parks and resorts division after serving as CFO. He’s been with the company for 26 years.
“This is certainly surprising and unexpected, particularly given the care that Disney and its board had previously taken towards the succession process, seemingly to avoid precisely this sort of disruption,” Anthony DiClemente, an analyst at Nomura Securities, said in a research report.
It is still unclear what led to the exit of Staggs, who is stepping down from his position in May. Analysts and industry insiders said Staggs’ lack of experience in entertainment content may have led the company’s board to change course on the succession plan.
The move by Disney set off a wave of speculation over what happened behind the scenes and who the company might now pursue to take over for Iger, who has earned Wall Street’s respect for growing the business through profitable acquisitions including Pixar, Marvel Entertainment and Lucasfilm.
Topeka Capital Markets analyst David Miller, in a note to investors, called Staggs’ impending departure “truly stunning.”
“Having known Tom for quite some time, we highly doubt that he would just voluntarily leave on his own accord after 26 years with the company, and oh so close to the CEO role, unless someone had called out his qualifications,” Miller wrote.
The company said it plans to “broaden the scope” of its search. Many observers interpreted that as a signal that the company would look at external candidates, including Facebook executive Sheryl Sandberg (who is a member of Disney’s board) and media mogul Peter Chernin.
Analysts agreed that the change increases the likelihood that Iger will extend his reign as CEO.
Todd Juenger, analyst at Sanford C. Bernstein & Co., said investors would have been satisfied with the pick of Staggs as CEO, despite his lack of experience on the content side of the business.
“The path of least resistance was clearly to ascend Mr. Staggs to CEO upon Mr. Iger’s retirement,” Juenger said. “On the other hand, Mr. Iger is universally acknowledged as having provided exemplary leadership. How do you follow an act like that?”
While analysts were reluctant to speculate, some did not rule out internal Disney candidates. Topeka’s Miller cited ESPN head John Skipper and media networks co-chair Ben Sherwood as possibilities.
But Nomura’s DiClemente said the company has ample time to figure out its path forward.
“We do know that while this news is clearly a setback to the company’s efforts to find an adequate successor to Bob Iger, that Mr. Iger does not plan to step down from his role as CEO until at least June 2018,” he said.