Disney Has $23 Billion in Cash Right Now. …But WHY?

Disney has been pretty tight-lipped when it comes to how they’ve been dealing with their financial stability during these uncertain times.

Magic Kingdom

Due to the ongoing global health crisis causing disruption to almost every segment of the Walt Disney Company, their unique situation could be seen by the casual observer as precarious at best.

But during the Disney Q3 earnings call last week, the company was forced to show analysts, investors, the media, and the public some of their cards. That’s when we learned Disney has locked away $23 billion in cash — just in case.

Adventureland at Magic Kingdom

Despite losing billions of dollars this year due to the interruptions of the Disney Cruise Line, Disney theme parks, and Walt Disney Studios, Disney is reporting they’ve ended their third fiscal quarter with $23 billion in cash reserves. While some might say this is an excessive amount of money to have on hand, Disney Chief Financial Officer Christine McCarthy explains, “We remain laser-focused on prudently managing our cash outflows and preserving liquidity.”

Magic Kingdom

So far, Disney’s prudence seems to be paying off. Even in light of the company reporting devastating losses of income, Disney’s stock prices were actually soaring mere hours later!

But why so MUCH? Well — most basically — because everyone, including Disney, is currently in very shaky financial territory. No one knows how long the global pandemic will go on, or what the lasting financial repercussions of the current health crisis will be. McCarthy states Disney was able to raise the funds in March and April with favorable interest rates and that Disney will be able to face the challenges caused by our new environment with this conservative approach.

Cinderella Castle

Think of it this way — the operating income for all of the Walt Disney Company’s segments saw a 72% drop while their year-to-date revenue for the first nine months of earnings for the fiscal year was $13.92 billion, down 29% from $19.57 billion for the same period last year.

Sitting on a $23 billion security pile might sound like one heck of an insurance policy, but when you’re a multi-billion dollar company facing zero-visibility on the future like Disney is, it’s really not that much!