Disney vs. DeSantis — How the Legal Battle Will Affect Stock Prices
Disney stock prices continue to plummet, losing nearly 40% from last fall and hitting below the $100 mark even with the spring tourism season in full swing. Abysmal first-quarter earnings from Disney+ rival Netflix, consumer fears of a recession, and continuing inflation all factored into the loss, but there’s even more at play in Disney World’s domain of Central Florida.
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What Is Reedy Creek Improvement District?
Since 1967, Disney World Co. has retained financial and legislative control over the 47 miles that encompass the Walt Disney World Resort. The land was deemed the Reedy Creek Improvement District.
RDIC is a special taxing district established by Florida State Legislature. Under the terms of the legislation, the district creates and manages all municipal services, in the same way a county government would. The district works closely with Disney World to maintain roads and waterways and provide high-level public services such as waste management, recycling and more, according to DisneyConnect.com.
The End of RDIC?
Earlier this year, Governor Ron DeSantis signed a 198-page bill abolishing the RDIC and replacing it with the Central Florida Tourism Oversight District. DeSantis appointed board members who would support his future policies.
But in their last act before relinquishing power, RDIC board members drafted a 151-page development agreement giving Disney control over the territory for the next 30 years, roughly. In a whimsical fashion appropriate in the land of princesses, the agreement gives Disney control over certain aspects of the RDIC for “21 years after the death of the last surviving descendant of King Charles” or until Disney abandons the area (which isn’t likely to happen in the foreseeable future).
RDIC Prepares to Fight the Good Fight
Under the agreement, Disney can control building heights, density, and advertising that appears within the district, including banning any ads from competitors.
Representatives from Disney insist the agreement was made in a “transparent and lawful matter,” Motley Fool recently reported.
But that isn’t stopping DeSantis from challenging it with a team of lawyers.
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If DeSantis wins, Disney could lose a good portion of the substantial power it has developed in Central Florida. If Disney wins, the company’s massive fan base — not to mention shareholders — could see “significant expansions, projects and, ultimately, revenue,” Motley Fool writes.
However, the legal battle could drag out for years. In the meantime, other aspects of the company beyond the flagship theme park, including Disney+, are likely to drive revenue and stock prices. If Disney sells off Hulu to Comcast, as some experts expect, and uses the funds to reduce debt and buy back stocks they sold off last year, it could bode well. Reinstating dividends, which CEO Bob Iger suggested in February, will also make Disney stock more desirable.
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Walt Disney World Resort represents a sizeable portion of Disney revenue and may be one of the first things that comes to mind when people hear “Disney.” But it’s not the only revenue stream for the company by a long shot. As of mid-April, analysts gave Disney stock a price target of $128 within the next 12 months, or a jump of 29%.
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This article originally appeared on GOBankingRates.com: Disney vs. DeSantis — How the Legal Battle Will Affect Stock Prices
