I sincerely hope that everyone reading this article will find themselves in a position to sell a company for a life-changing amount. If you find yourself in that situation, there’s a good chance you will argue whether you should sell Cash or Store. This is a tough call. If you are selling to a publicly traded company with a reputable track record, then accepting stock may not be a bad decision. But even selling a publicly traded company with a stellar performance record can be risky. Take Mark Cuban. In 1999, when Mark Cuban sold Broadcast.com to Yahoo, the deal was worth $ 5.7 billion in Yahoo stock. No dollars in cash. Yahoo stock was trading at $ 163 a share the day the deal closed. About a year and a half later, a share of Yahoo traded for $ 8. Mark Cuban is a multi-billionaire today, as he dumped 100% of his shares on the very first day his six-month lock expired. Mark was lucky and smart. A thousand other dotcom entrepreneurs were not so lucky or smart.
Long story short, no one will ever mistake you for taking cash. Cash, as they say, is king. However, there is another option to consider. To hedge your bet, you can request half cash, half stock.
George Lucas did the same thing when he sold it to Disney. And boy was that a good call in retrospective!
How did George Lucas make 100% Star Wars in the first place?
[***If you’ve read our article “How One Brilliant Decision In 1973 Made George Lucas A Multi-Billionaire Today”, the following paragraph may be old news. But it’s worth explaining some history before we get into the Disney deal.***]
George Lucas did not have a film industry title in the early 1970s. First, he was just 28 years old in 1973 when he gave a “Western set in space” to 20th-century Fox executives. The second, which eventually became “Star Wars”, was the only THIRD film to be directed by Lucas after 1971’s “THX 1138” and 1973’s “American Graffiti”.
George, however, dominated a bit. “American Graffiti” wound up becoming one of the most profitable films of all time, eventually earning $ 140 million from its $ 777,000 budget.
But despite this massive success in his pocket, George was still not in a position to tell 20th-century Fox executives that he needed $ 11 million – 15 times his last budget – for a strange space film. For, while retaining full and exclusive ownership, the intellectual property right of the franchise.
Frankly, 20th Century Fox said he wanted to go out and make “American Graffiti 2”, or some other teen-age drama / comedy coming out. But George wanted to westernize his place. 20th Century Fox executives were on board, but panicked.
FYI, $ 11 million in 1973 is equivalent to about $ 65 million today. As a comparison, the 2019 “Joker” had a total production budget of $ 55 million.
To ease the nerves of the studio, George had a proposal.
Following the success of “American Graffiti”, George was entitled to a salary of $ 500,000 for his next project, raising 300% on the $ 150k earned from “Graffiti”.
Instead of accepting $ 500,000, George said that Fox kept his salary for $ 150,000 in exchange for two fair values:
# 1) That he retain all business rights.
# 2) That he retains the authority of any sequel.
As crazy as it is now, it was actually a fantastic deal for the studio at the time. Fox had recently lost a fortune in the trading business with the monumental failure of 1967’s “Doctor Dolitel”, so they were not dying at all to return to that world. Furthermore, Mal simply was not a meaningful revenue stream for the studio then. As a sequel, considering the fact that none of the executive thought the film had a snowball chance of making money for the first time, the sequel was considered useless.
That’s why the deal happened …
Decades later it would be seen as the best deal in Hollywood history.
The pre-Disney “Star Wars” sequel would go on to produce $ 3.5 billion at the global box office. The “Star Wars” DVD produced $ 4 billion.
And then there are toys and merch.
The pre-Disney “Star Wars” produced an estimated $ 12 billion in business revenue.
100% of the profits from all these streams went to George Lucas.
Most importantly, however, without retaining IP rights, George would have nothing “ownership”, and therefore Disney would have nothing to sell for decades afterward.
Sell star wars
On October 12, 2012, it was announced that George Lucas entered into an agreement to sell all rights to the entire “Star Wars” franchise to Disney for $ 4 billion.
George opted for a half cash / half stock deal as we reported earlier. Technically, the deal was 55% cash / 45% stock:
$ 2.21 billion in cash
Disney’s 37,076,679 shares
At the time the deal was closed, Disney was trading at $ 50 per share, so the “stock” share was $ 1.85 billion. His 37 million shares represented approximately 2.1% stake in the company. She was immediately the second largest individual shareholder behind Lauren Powell Jobs, widow of Steve Jobs. When Steve Jobs sold Pixar to Disney in 2006, he received 138 million shares of the company, which was about 7% of the total outstanding. Lauren inherits her stake after Steve’s death. Lauren has since sold about half the stake, but is the largest individual shareholder, owning 4% of Disney.
Immediately before Disney announced the sale, George Lucas had total assets of $ 3.3 billion. After the deal was finalized, we estimated their after-tax net worth at $ 5.5 billion.
Talking about taxes, thanks to reduced taxation that stopped two months later, George actually saved nearly $ 100 million in closing taxes. On January 1, 2013, business-friendly George W. The tax period ended in the Bush era, at which time the long-term capital gains tax rate increased from 15% to 20%.
“Star Wars” was not the only franchise Disney bought for $ 4 billion. In 2009, Disney paid $ 4 billion for Marvel Entertainment. However, many Marvel franchises had pre-existing deals with other studios at the time the deal was announced.
2012’s “The Avengers” was the first Marvel film to be fully produced and distributed by Disney, without any other studios cutting the profits.
Disney will earn approximately $ 20 billion from the Marvel Movies Post 2012 at the global box office.
Disney has earned about $ 5 billion since Lucas “Star Wars” films.
On November 12, 2019, Disney entered the streaming wars with the launch of Disney +. Ten million people signed up in one day. This week, just 16 months after launch, Disney confirmed that they had crossed 100 million paying subscribers for the streaming service.
So, how has Disney stock performed over the past decade? Below is the chart. Arrow is the day George Lucas sold to Disney:
As you can see, for a few months in the early 2020s when basically every stock epidemic in the world is feared, Disney stock is on a tear.
This week, thanks to a roughly 100 million Subscriber announcement, Disney hit an all-time high of $ 203 per share. On Wednesday (the day this article was written), Disney closed at $ 195.
George’s Disney Steak Today
By all accounts, George Lucas has not sold a significant number of his Disney shares. In 2013, there were reports that he had sold his stake 100%. Those reports were quickly dismissed. What actually happened was the notice was filed with the Securities Exchange Commission after George transferred shares of George W. Lucas, Jr. Forth Revised and Rested Living Trust. Some outlets interpreted that to indicate an intent to liquidate as a filing. A Lucasfilm representative dismissed the rumors, with George confirming that he had no intention of selling his shares then or anytime soon.
George still holds his entire stake, 37 million shares of George at $ 200 =
$ 7.4 billion
Everything will be alright!
In the years when Disney has been paying dividends (which historically have been every year except 2020), as the owner of 37 million shares, George receives $ 32 million twice a year as a dividend payment. . So in the year 2013 – 2019, George received about $ 448 million in dividends.
Put it all together and now you understand why George’s total wealth is at the highest level today? $ 10 billion.
This is actually really good news for humanity because George was one of the first billionaires to sign Bill Gates and Warren Buffett’s film pledge. George has confirmed that by the time he dies, he intends to donate to his NTRE. In other words, all of us should remain vested for Disney stock!
One last point –
If George had paid in full in stock, he would have received about 80 million Disney shares. At $ 200, today those 80 million shares would be valued at $ 16 billion
Should have stocked all!