Happy Sunday, I’m Bill Cohan.

Welcome back to Dry Powder, my biweekly chronicle of what’s really happening on Wall Street. Tonight, notes on the iconic investor Nelson Peltz’s looming battle with Disney and its equally iconic C.E.O., Bob Iger. Insiders familiar with Trian’s boardroom tactics know there’s plenty of reason for Iger to be wary. And he’s already made his first mistake.

I can understand why Iger’s supporters may feel that Peltz is a gadfly who knows nothing about the media and the problems facing entertainment companies. (Not true actually.) Plus, Iger would never want to start his reunion tour with a public capitulation. Giving in to Peltz’s request for a board seat might have looked weak, and perhaps unnecessary. As my partner Matt Belloni has wisely noted, the Disney board needs to load up on executives with experience in entertainment, not with shareholder proxy warriors.

But denying Peltz a board seat, following the January 12 announcement that Trian was mounting a proxy fight, will arguably prove to be a rare mistake by Iger. After all, it’s better to have your enemy inside the tent, looking out, than to have your enemy outside the tent, looking in and taking pot shots loudly and publicly.

There are already grave consequences of the decision to keep Peltz off the board: in particular, Peltz has initiated a noisy proxy fight with Disney shareholders to try to get the seat, which will eat up Iger’s valuable time and potentially distract him from more pressing operational problems. For the next two months, until the proxy vote to be held at the annual shareholders’ meeting, as yet unscheduled, but usually held in March, Iger will be preoccupied with its outcome. Meanwhile, Peltz has released a patented Trian “white paper”—a 35-page PowerPoint document outlining Disney’s many flaws and Trian’s investing prowess.

The PowerPoint illuminates Trian’s three previous successful proxy fights: at Heinz, in 2006; at DuPont, in 2015; and at Procter & Gamble, in 2017. “In all three,” according to Trian’s PowerPoint, “we heard substantially the same rhetoric from the companies and their advisors prior to the proxy contest. However, management’s views of Trian and Nelson Peltz changed dramatically after we began to work with them to enhance shareholder value. We subsequently developed strong and positive relationships with all three boards and management teams.”

On Thursday, Peltz got plenty of airtime on CNBC to further articulate the thesis put forward in the white paper. He said Disney “has been put through the ringer,” in part because Iger hung around Disney’s offices until the end of 2021 and never really allowed Chapek, with whom Peltz initiated a relationship this summer, to do his job. He also criticized the Disney C.F.O. Christine McCarthy, who ostensibly helped engineer the coup to bring Iger back to Disney on November 20, for failing to give better guidance to Wall Street analysts that Disney’s last quarter was going to be a big miss—a miss that stunned Wall Street and Disney shareholders and was the final straw for Chapek.

Peltz was pissed that Disney eliminated its dividend after 57 years and blamed that on Disney’s decision, during Iger’s first round as Disney C.E.O., to overpay for Rupert Murdoch’s Fox entertainment assets. (A stalking horse bid from Comcast also jacked up the price and forced Iger to pay more to win.) “Fox hurt his company,” Peltz said. “Fox took the dividend away. Fox [turned] what was once a pristine balance sheet into a mess.”

Of course, Peltz didn’t go away. On November 8, Trian, through various entities it controls, started buying its $900 million stake in Disney. The next day, Peltz called Chapek again to start “a formal dialogue” between Trian and Disney. Four days later, Peltz and his son, Matt, met with Chapek and discussed why Trian had decided to invest in Disney and its concerns about the way things were going operationally and strategically. They also discussed “accountability” and ways to cut costs and to increase profitability. On November 15, Chapek directed Peltz to speak to McCarthy, Disney’s C.F.O., going forward; Chapek would no longer be speaking with Peltz.

On November 17, McCarthy and Peltz spoke, with McCarthy suggesting a meeting after Thanksgiving. Peltz, concerned about a looming December 9 deadline for filing Disney’s proxy materials, including recommendations for new directors, wanted an earlier meeting. McCarthy rejected that suggestion. (In any event, the Iger coup was probably already underway.)

On November 23, three days after Iger returned as C.E.O., and a day before Thanksgiving, Iger, McCarthy, and Horatio Gutierrez, the Disney general counsel, met virtually with Peltz and his team. At that meeting, Peltz gave Iger a way to avoid a “lengthy and costly” proxy fight by giving him a board seat. He generously said he supported Iger’s return as C.E.O. for the two years it supposedly will take for him to choose another successor. Iger suggested instead that Peltz and Disney find a mutually agreeable candidate—a.k.a. not Peltz—to serve on the board, an option which Peltz rejected. Then the Disney board met on November 30 and rejected the idea of Peltz joining the board. The next day, Trian advised Disney of its “intention” to nominate Peltz to the board of directors, presumably via a proxy fight.

On December 20, Peltz gave Iger another out. After Iger informed Peltz that he could no longer speak with him directly, he asked Iger to find a way to chat “in order to see if there was a productive way to move things forward.” Peltz also informed Iger that, absent a board seat, Trian would release its PowerPoint and initiate a proxy fight for a board seat, handing to Disney shareholders the decision about whether to include him on the board or not. Iger then spoke with Peltz and told him there would be a virtual board meeting, sometime after January 6, during which Trian could again try to make its case for Peltz having a board seat. Then he jetted off for a long holiday vacation on his yacht, off the coast of New Zealand.

Trian was given 45 minutes to make its presentation to the Disney board on January 10, as well as another 15 minutes to speak with Iger, McCarthy, and Gutierrez beforehand. Trian expressed its disappointment to Iger about these time limitations because it feared the meeting would not be substantive, and it wasn’t, no surprise. In its 45-minute presentation to the board, Peltz made the case for “restoring the magic” to Disney. (Restorethemagic.com is the website Trian set up to extol its virtues and make its case for Peltz to Disney shareholders.) He reiterated that he supported Iger’s two-year tenure at the company and hoped that the Disney dividend could be restored by 2025. He also stated once again his desire for a board seat and asked that the board let him know its decision as soon as possible.

The next day, Susan Arnold, the board chairman who was in her final act before being replaced by longtime board member Mark Parker, called Peltz and told him that if he entered into a standstill agreement, Disney would allow him to have an “information sharing” and “advisor/observer” arrangement with Disney and the board of directors but not a board seat. Peltz objected and asked Arnold to have the board reconsider its decision. Arnold went back to the board, presumably to discuss the request a final time. She called Peltz back and told him that there would be no board seat for him.

Peltz first came onto Immelt’s radar screen in 2007, after Peltz’s successful proxy fight at Heinz, where the company’s C.E.O. thought, in the end, Peltz had been a constructive board member. Immelt started picking Peltz’s brain and dangled the idea of Peltz joining the GE board. After the 2008 financial crisis brought GE to the precipice, Immelt hinted again that he might bring Peltz on to the GE board. But Immelt decided against it. Years later, Immelt invited Peltz to speak to GE’s top managers at Crotonville, its management development center on the Hudson River. In 2014, Immelt again sought the advice of Peltz and Ed Garden, Peltz’s partner and son-in-law.

Immelt, after all, knew the Gardens well from his years at Dartmouth and through his friendship with Tom Garden, Ed’s brother and his Dartmouth classmate. Immelt used to spend holidays at the Gardens’ home in Melrose, Massachusetts, instead of returning home to Cincinnati. Trian had invested in the Bank of New York and had some advice for Immelt about how to deal with federal banking regulators in the wake of the 2008 financial crisis and after GE Capital was dubbed a SIFI, a systemically important financial institution. Peltz and Garden recommended to Immelt that GE get out of GE Capital; it no longer had a competitive advantage, they told him.

Immelt took Peltz’s advice. In April 2015, he announced an ambitious plan to divest GE Capital. After the announcement, Peltz called Immelt and congratulated him and said that he was glad Immelt had listened to him. By then, Immelt had also heard from Wall Street bankers that activist hedge funds were circling GE, an underperforming conglomerate, not unlike Disney. (Before Peltz had pounced on Disney, the company had also attracted the attention of Dan Loeb and his activist hedge fund, Third Point.) Immelt decided that inviting Peltz to become a large GE shareholder and having him inside GE was a good idea. It would also serve, he believed, to ratify his decision to sell off GE Capital and be an attempt to beat the activists at their own game.

Immelt had decided by then that Peltz was not “a bomb thrower” but would be more “reasonable” and “constructivist,” as he wrote in his 2021 memoir, Hot Seat. He was hoping for the best from Trian. “If we do well, will it get ugly?” Immelt rhetorically asked the investment banker Blair Effron, a trusted advisor. “No. And if we don’t do well, will it get ugly? Yes. But why shouldn’t it? If I’m fucking up, why shouldn’t somebody beat me up?” Trian bought $2.5 billion worth of GE stock, its largest investment ever, and bet big on Immelt and a turnaround at GE.

Trian bet wrong. And so did Immelt. Less than two years later, in May 2017—after it was clear to Trian that Immelt could not deliver the profits that he had promised, and that Trian had demanded—or the cost cuts, or the restoration of the dividend, or the continuation of the stock buyback program that Trian also wanted—Immelt’s “friends” at Trian turned on him.

Trian had warned GE that it would bear its teeth if it didn’t get from GE what it wanted. And after Immelt’s poor performance at an industry conference, Trian decided les jeux sont fait. Trian was a large GE shareholder but not on the GE board—yet. Working with GE board members, Trian arranged for Immelt’s defenestration from GE. Immelt used to refer to Nelson Peltz as “the smiling crocodile,” and the croc had shown its teeth. “They’d wanted my scalp, and they’d gotten it,” Immelt wrote in his 2021 memoir.

But that wasn’t the end of the Trian story at GE. Immelt’s successor, John Flannery, made the fateful decision to invite Ed Garden on to the GE board. Trian believed that “a fresh set of eyes on everything [and] new perspectives would be healthy,” according to what someone familiar with Trian’s thinking at the time told me. But the hedge fund was willing to work with Flannery because, like Trian, he agreed that “job number one” was “to find all the snakes in the rocks” and to “let the world know we’re going to put a bright spotlight on it.” Flannery lasted 15 months as the C.E.O. of GE. Working together with Garden and Trian, lead director Larry Culp—whom Flannery had also invited on to the GE board, presuming that his experience as the C.E.O. of Danaher Corporation, a mini-conglomerate, would be useful as GE attempted to slim down—engineered a boardroom coup that resulted in Culp taking over from Flannery, on October 1, 2018. The board had met secretly to vote to get rid of Flannery and to replace him with Culp, who has been the C.E.O. since then and who has announced the break-up of the company, now underway, which as I’ve reported previously was Flannery’s idea, dubbed “Project Eisenhower.”

As of November 2022, its latest S.E.C. filing through the third-quarter of the year, Trian still owned about four million GE shares, worth around $250 million. In other words, even after having been invited into the GE shareholder group and invited on to the GE board—without a proxy fight—Peltz, Garden and Trian still managed to kill off two C.E.O.s and install its own man in the role.

We spoke about what he would advise Iger to do, given that, whether Peltz is lobbing grenades inside or outside the boardroom, Trian’s involvement is kind of deadly and seriously disruptive. He said it depends first whether you think Disney shareholders will support Iger or Peltz.

It’s hard to know right now, of course. Iger still seems pretty indomitable. But if Peltz wins, then the fox is in the henhouse after being seriously blown off. “Then they can totally go hostile,” this person said. The other concern, he said, is “what is the disruption” to the company and the management, and to Disney’s reputation, while trying to fend off the Trian proxy battle? Back when Ed Garden was going on the GE board, Jim Tisch, a GE board member, warned his fellow directors that it would be a big mistake to invite Garden in. Tisch was out of his mind about Trian having a representative on the GE board. “He was very much like, ‘Tell this guy to fuck off, we don't need to do anything,’” I was told. But the idea that prevailed was that Trian would only have one seat on the board out of 12 seats. How bad could that be?

But Tisch was adamant. “You have no idea what this guy is going to do to the dynamics of this board,” he told his fellow GE board members. “You have no idea what one person can do to the dynamics of a full board… It’s not as innocuous as it seems to just add a person. You’re adding one person, you’re adding a quantum of disruption and division.” (A spokesman for Trian, Ann Tarbell, referred me to Trian’s Disney PowerPoint presentation, including the testimonials from the C.E.O.s of Heinz, Dupont, and Procter & Gamble about Trian’s positive contributions as board members. She declined to comment further.)

So, Bob Iger is pretty much doomed either way, it sounds like, although losing the proxy fight with Nelson is worse from the perspective of the management and the board, at least according to my source who has seen Peltz up close and in action. “You bring them on the board, you’re virtually guaranteed maximum board disruption and division,” he continued. “Like that’s almost the playbook: Let me sow chaos amongst the board members, split them, divide new against old, etc. That’s what you’re going to get… And so if you frame it that way, then you wonder, ‘Why invite him in? You have to keep him off,’ and it sounds like that’s what they tried to do by offering him the appeasement of the observer status.”

I asked him what would happen if Peltz wins the proxy fight. He didn’t hesitate for a second. “It’s way worse if he wins the proxy fight,” he said.