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When George Lucas Sold Star Wars To Disney, He Took Half Of The $4 Billion Buyout In Stock. That Was A Smart Choice…

In October 2012, George Lucas announced that he had sold his “Star Wars” franchise to Disney for $4 billion. 50% in cash. 12 stock. He must be feeling very well right now about his investment choice.

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I genuinely hope that everyone who reads this essay will one day be in a position to sell a business for a sum of money that will change their lives. In the event that you do find yourself in that situation, there is a good probability that you will be considering whether to sell for cash or stock. It’s a hard decision. Accepting stock might not be a bad idea if you’re selling to a well-known publicly traded corporation. However, it can be dangerous to sell to a publicly traded corporation with a good track record. Consider Mark Cuban In 1999, Mark Cuban exchanged $5.7 billion in Yahoo stock for the sale of Broadcast.com to Yahoo. Not a single penny in cash. Yahoo stock was trading at $163 per share on the day the transaction was finalized. A year and a half later, Yahoo was trading for $8 per share. The reason Mark Cuban is a multi-billionaire today is because he dumped 100% of his shares on the very first day his six month lock up expired. Mark was fortunate and wise. One thousand other dotcom business owners lacked his good fortune and wisdom.

Long story short, no one will ever fault you for taking cash. As they say, money is king. There is, however, another choice to think about. You might ask for half stock and half cash to spread your bets.

When George Lucas sold out to Disney, he did exactly that. And boy was that a good call in retrospect!

George Lucas Disney Sale
(Photo by Richard Harbaugh/ Disneyland Resort via Getty Images)

(Image courtesy of Getty Images and Richard Harbaugh/Disneyland Resort)

How Did George Lucas Own 100% Of Star Wars In The First Place?

The next sentence may be outdated if you’ve read our article “How One Brilliant Decision In 1973 Made George Lucas A Multi-Billionaire Today.” But before we discuss the Disney agreement, it’s important to go through some background information. ***]

Early in the 1970s, George Lucas wasn’t exactly a titan of the movie business. First of all, in 1973, when he presented 20th Century Fox executives with his idea for a “western set in space,” he was only 28 years old. Second, the film that would later become “Star Wars” was only Lucas’ THIRD effort as a director, following 1973’s “American Graffiti” and 1971’s “THX 1138.”

But George did have some influence. “American Graffiti” wound up becoming one of the most-profitable movies of all time, eventually earning $140 million off its $777,000 budget.

However, despite having this enormous success in his back pocket, George was still unable to convince executives at 20th Century Fox that he needed $11 million, or 15 times his previous budget, for a bizarre space movie while also holding the sole and complete rights to the franchise’s intellectual property.

The executives at 20th Century Fox really wanted him to do “American Graffiti 2” or another film about adolescent coming-of-age. George, however, wished to make space more western. Executives from 20th Century Fox were on board but anxious.

FYI, $11 million in 1973 is the same as around $65 million today. Comparatively, the production budget for “Joker” from 2019 was $55 million.

George suggested Fox keep his compensation at $150,000 in exchange for two seemingly unimportant requests rather than accepting $500,000:

#1) That all merchandising rights be retained by him.

Thus, a deal was reached…

It would be remembered as the greatest bargain in Hollywood history decades from now.

Pre-Disney “Star Wars” sequels would go on to generate $3.5 billion at the global box office. DVD sales of “Star Wars” brought about $4 billion.

The IP rights were crucial because, without them, George would not have “owned” anything and, consequently, would not have had anything to offer to Disney in the future.

Selling Star Wars

George Lucas and Disney announced their agreement to sell all rights to the “Star Wars” franchise to Disney for $4 billion on October 12, 2012.

Speaking of taxes, by taking advantage of a tax break that would expire two months later, George was able to avoid paying close to $100 million in taxes. On January 1, 2013, business-friendly George W. Bush era tax cuts expired, at which point the long-term capital gains tax rate increased from 15% to 20%.

Disney Stock

Disney launched Disney+ on November 12, 2019, to enter the streaming competition. On the first day, ten million users signed up. Disney announced this week that they have surpassed 100 million paying customers to the streaming service, only 16 months after its introduction.

(Photo by Richard Harbaugh/ Disneyland Resort via Getty Images)

As you can see, Disney stock has been on a tear, with the exception of a few months in early 2020 when virtually every stock in the globe crashed because of pandemic fears.

George’s Disney Stake Today

In years when Disney is paying dividends (which historically has been every year except 2020), as the owner of 37 million shares, George receives $32 million twice a year as a dividend payment. George apparently collected about $448 million in dividends from 2013 to 2019 as a result.

George was among the first billionaires to sign Bill Gates and Warren Buffet’s Giving Pledge, which is actually fantastic news for humanity. George has declared that when he passes away, he will donate his WHOLE wealth to charity. In other words, let’s all continue to support Disney stock!

One final point:

All stock should have been done!

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