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Why Disney Stock Was Slumping Today

By Jeremy Bowman - Updated Mar 20, 2020 at 2:33PM

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Shares of the entertainment giant slipped after it issued a warning and made a debt offering.

What happened

Shares of Walt Disney (DIS 1.84%) were heading lower today after the company filed a form with the SEC last night warning investors its performance over the near-to-medium term will be impacted by actions taken in response to the coronavirus outbreak, and that the outbreak could lead to consumer behavior changes that would further disrupt its business. The company is also selling debt to shore up its liquidity in the near term.

As a result of that news, the stock was down 6.6% as of 1:41 p.m. EDT Friday.

The Magic Kingdom at Walt Disney World

Image source: Disney.

So what

The entertainment giant, which had already taken on a lot of debt to fund its acquisition of Fox, is now offering $6 billion in loans due between 2025 and 2050, with interest rates between 3.35% and 4.7%, adding to its $38 billion debt burden. 

The company also cautioned on a number of items, some previously announced, such as theme park closures, canceled sports that air on ESPN and ABC, and suspended production of the company's film and television projects. Disney also said that COVID-19 could change consumer behavior, though it didn't explain what it meant by that. The company may believe that not all of its businesses will return to full health due to lasting impacts from the pandemic.

Now what

Separately, Disney announced that it would delay the launch of Disney+ in India due to the postponement of the Indian Premier League's cricket season. And French telecom operator Orange has asked the company to delay the streaming service's launch in France due to an already-strained bandwidth in Europe as lockdowns widen across the continent because of the outbreak.

Disney's filing and debt offering make it clear that it's facing significant near-term challenges. However, the company has an enduring set of entertainment brands, and its theme parks have been a vacation staple for generations. The coronavirus outbreak has certainly dealt a setback to Disney, but the stock should recover over the long term. Once people feel safe, demand for travel and Disney's other businesses should return. 

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