George Lucas May Not Be Too Happy With Disney These Days

Mark Hake

George Lucas, Jr., created the Star Wars films and related franchises, and he owned the toy rights and rights to any sequels. His production company, Lucasfilm, made billions on the sequels and other franchises, such as the Indiana Jones films.

But in late 2012 when he was 69, George Lucas decided to sell out in a sweet-heart deal to Disney (DIS). George Lucas sold his 100% owned Lucasfilm company to Disney in Dec. 2012. He received $2.21 billion in cash and 37.1 million in shares of Disney. The shares, trading at about $49 at the time were worth about $1.82 billion.

Today these shares trade for $148.11. So now his net worth from the Disney stock is worth $5.495 billion. That makes him one of the larger Disney shareholders with about 2% of the stock outstanding.

Why He Might Be Upset

At the time, he probably had to pay out a large portion of the cash in taxes, so the bulk of his net worth since has been his shares in Disney.

However, George Lucas probably has a lot to complain about these days. For one, after 2019 Disney stopped paying its semi-annual 88 cents per share dividend. That used to bring him an annual income of $65.3 million.

Moreover, the company also stopped buying back its shares. This would have increased his stake in the company over time.

And lastly, the company binged on a massive $71.3 billion acquisition of 21st Century Fox in late March 2019. This hefty price tag is why the company stopped paying dividends and buying back stock.

At the time, Disney stock was at about $108, and today it's at $148. So, in return for the 37% upside, he has had to give up all his income from dividends. That is probably OK from his standpoint, however. Since then the value of his shares has risen from $4.011 billion to $5.495 billion. So giving up $65 million in annual dividends is probably not worth complaining about.

Total Return For His Investment in Disney

The only issue is, if the stock keeps falling, then it will not be worth the hassle. Assuming he has not sold any of the 37.1 million shares (and we could not find any public documents indicating that he had done so), the return has not been that great.

For example, his shares were worth $1.82 billion in Dec. 2012. By Nov. 26, 2021, or 8.92 years later, the shares are worth $5.495 billion, or triple the original value.

That works out to a compounded annualized return of just 13.2% annually. This does not include the dividend payments up until 2020, which probably averaged about 2.0% or so in dividend yield. But after losing two years of dividends now his total return probably has averaged 14% or so annually.

That is below the market return, but not by much. For example, the S&P 500 index is 3.2 times the value from over 8 years ago at the end of 2012. That is higher than the 3 times Disney stock gained over the same period. I am also going to assume that the dividend yield has been similar.

So the bottom line is that Disney has performed just under the market return since he sold out. The only difference now is that he doesn't have a dividend income, whereas the market index does have a dividend yield. Over time that could result in a huge loss for George Lucas.

But with this much money, George Lucas might not really care that he doesn't make $65 million in dividends each year.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ
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