Someday, you might find yourself in the enviable position of selling a company for a life-changing amount of money. And when that moment comes, one of the toughest decisions you’ll face is whether to take the money in cash or stock.
It’s a tough call. If you’re selling to a publicly traded company with a reputable track record, accepting stock might not be a bad decision. But even selling to a publicly traded company with a stellar performance record can be risky.
Take Mark Cuban. When Mark Cuban sold Broadcast.com to Yahoo in 1999, the deal was for $5.7 billion in Yahoo stock. Not a single dollar in cash. On the day the deal closed, Yahoo stock was trading at $163 per share. About a year and a half later, a single share of Yahoo traded for $8. 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, right before the dotcom crash.
No one will ever fault you for taking cash. Cash is king. But there’s a third path: take a mix of both. Hedge your future.
That’s exactly what George Lucas did when he sold “Star Wars” to Disney in 2012 for $4 billion. He took roughly half in cash and half in Disney stock. At the time, it was hailed as a brilliant move.
But was it?
(Photo by Richard Harbaugh/ Disneyland Resort via Getty Images)
How Did George Lucas Own 100% of 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 wasn’t exactly a film industry titan back in the early 1970s. First off, he was just 28 years old in 1973 when he pitched a “western set in space” to 20th Century Fox executives. Secondly, what eventually became “Star Wars” was only the THIRD movie that would be directed by Lucas, following 1971’s “THX 1138” and 1973’s “American Graffiti.”
George did have a bit of clout, though. “American Graffiti” turned out to be one of the most profitable movies of all time, eventually earning $140 million off its $777,000 budget. That’s not a typo.
But even with this enormous 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 previous budget – for a weird space movie, while also retaining complete and exclusive ownership of the franchise’s intellectual property rights.
Frankly, 20th Century Fox execs wanted him to go out and make “American Graffiti 2” or some other teenage coming-of-age drama/comedy. But George wanted to make his space western. 20th Century Fox executives were on board, but nervous.
To ease the studio’s nerves, George had a proposition. After the success of “American Graffiti”, George was entitled to a salary of $500,000 for his next project, a 300% raise over the $150k he earned from “American Graffiti.” Instead of accepting $500,000, George proposed that Fox keep his salary at $150,000 in exchange for two seemingly insignificant asks:
- George would retain all merchandising rights.
- George would retain the rights to any sequels.
As crazy as it sounds now, at the time, this was actually a fantastic deal for the studio. These demands seemed harmless. Fox had recently lost a fortune in the merchandising business with the monumental failure of 1967’s “Doctor Dolittle,” so it wasn’t exactly dying to get back into that world. Moreover, merchandise was simply not a meaningful revenue stream for studios back then. As for sequel rights, considering the fact that no executive thought the movie had a snowball’s chance in hell of making money the first time around, the sequel rights were considered worthless.
So the deal was struck! Everyone was happy.
Decades later, that negotiation would be hailed as the single greatest deal an artist ever struck in Hollywood.
Under Lucas’s control, the original “Star Wars” trilogy and prequels generated $3.5 billion at the global box office. Home video sales added another $4 billion. And merchandise? An estimated $12 billion in revenue, all of which flowed to Lucas, who owned it outright.
But most importantly, because he retained the intellectual property rights, George Lucas actually owned the intellectual property/concept of “Star Wars.” Which meant that decades later, he had something of incredible value to sell to Disney.
Selling Star Wars
On October 12, 2012, it was announced that George Lucas reached an agreement to sell all rights to the entire “Star Wars” franchise to Disney for $4 billion.
As we teased earlier, George opted for a half-cash/half-stock deal. Technically, the deal was 55% cash/45% stock. That equated to:
- $2.21 billion in cash
- 37,076,679 shares of Disney
At the time the deal was closed, Disney was trading at $50 per share, so the “stock” portion was $1.85 billion. His 37 million shares represented a roughly 2.1% stake in the company. He was immediately the second-largest individual shareholder behind Laurene Powell Jobs, Steve Jobs’ widow. That enormous stake was born when Steve sold Pixar to Disney in 2006 for 138 million shares of the company, roughly 7% of the total outstanding. Laurene inherited his stake after Steve’s death. Laurene has since sold off roughly half of the stake, but she is the largest individual shareholder, owning around 4% of Disney.
George’s Disney Stake Today
George Lucas has not sold a significant number of his Disney stake and likely still owns nearly all 37 million shares. In 2013, there were reports that he had sold 100% of his stake. Those reports were quickly debunked.
Assuming George still owns his full stake, at today’s share price of $118, George’s 37 million shares are worth = $4.336 billion.
Combined with his other roughly $5 billion in real estate, investments, and prior earnings, today George Lucas’s net worth is $9 billion. That makes him the third richest celebrity on the planet behind his good buddy Steven Spielberg ($10 billion) and actress Jami Gertz ($12 billion). Jami’s husband is an extremely successful private equity tycoon named Tony Ressler. Jami and Tony own the Atlanta Hawks.
FYI: When Disney stock briefly reached an all-time high of $200 per share in March 2021, his 37 million shares were worth $7.4 billion.
There is a sweetener…
Dividends
Since 2012, Disney has paid George Lucas over $500 million in dividends. Today, he earns $37 million per year simply for holding his shares.
All of this success is really good news for humanity because George was one of the first billionaires to sign The Giving Pledge. George intends to give his entire fortune to charity by the time he dies. In other words, we should all keep rooting for Disney stock!
Cash Or Stock?
So, was George Lucas smart to structure the “Star Wars” sale as a half-stock, half-cash deal?
Absolutely. He hedged his risk, locked in generational wealth, and still retained long-term upside through Disney shares. Today, he’s worth approximately $9 billion, with about $4.3 billion of that tied up in his 37 million Disney shares.
What if he had taken all cash?
Assuming a total tax hit of 28%, Lucas would have been left with $2.868 billion after taxes. If he had invested that money in an S&P 500 index fund, his portfolio would be worth an estimated $11.5 billion today.
What if he had taken all stock?
Had George done an all-stock deal, he would have received 80 million Disney shares. At today’s price of $118, that stake would be worth $9.4 billion. Combined with his other $5 billion and an extra $500 million he would have received in dividends and today he could have been worth around $15 billion. And if Disney’s stock price ever climbs back up to its previous high of $200 per share, George’s hypothetical 80 million shares would have been worth $16 billion, pushing his net worth to $21 billion.
So, yes—taking half cash was smart. But going all stock? That would have been the greatest Jedi mind trick of all.
