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Disney Stock Higher As Activist Dan Loeb Reconsiders ESPN Sale Demand

Activist investor Dan Loeb said Sunday that he now has a "better understanding" of ESPN's potential as a Disney vertical.

Updated at 11:26 am EST

Walt Disney  (DIS) - Get Free Report shares nudged higher Monday after activist investor Dan Loeb appeared to back away from an earlier demand for the entertainment group to seek the sale of its ESPN television network.

Loeb said in a Tweet sent from his verified account Sunday that he and his Third Point LLC hedge fund, which manages around $14 billion in assets, have a "better understanding of (ESPN's) potential as a standalone business and another vertical for (Disney) to reach a global audience to generate ad and subscriber revenues.

The change-of-heart followed weekend comments from Disney CEO Bob Chapek, who told media outlets during a Disney Expo event that ESPN remains "critical" to his overall media strategy despite receiving more than a hundred enquiries from companies and investors looking to buy it. 

Last month, Loeb pushed for the sale of ESPN, shortly after unveiling a new $1 stake in the media and entertainment group, saying it would alleviate leverage at the parent company while allowing a stand-alone ESPN the flexibility to pursue increasingly expensive sports rights and expand into the lucrative sports betting market.

Loeb also pushed for cost cuts and debt reduction at Disney, as well as the purchase of Comcast's  (CMCSA) - Get Free Report 33% minority stake in Hulu prior to the contractual deadline in early 2024, adding he wants the firm to initiate what it calls a "board refresh" to fill what he called "gaps in talent and experience as a group that must be addressed". 

"We look forward to seeing (ESPN president James Pitaro) execute on the growth nd innovation plans, generating considerable synergies as part of The Walt Disney company," Loeb added in a follow-up Tweet.

Disney shares were marked 0.7% higher in early Monday trading to change hands at $116.02 each.

Last month, Disney said ESPN+, its sports-focused streaming business, ended the third quarter with 22.8 million paid subscribers, with average revenue per user rising 1.8% from last year to $4.55.

Overall, Disney said adjusted diluted earnings for the three months ending in June, the group's fiscal third quarter, came in at $1.09 per share, up 36.25% from the same period last year and firmly ahead of the Street forecast of 97 cents per share.

Group revenues, Disney said, rose 26% to $21.5 billion, topping Street forecasts, while overall subscriber totals for its Disney+ hit 152.1 million, topping analysts' estimates by around 3 million.