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Obi-Wan Ken-IPO?
Star Wars fans would love to own a piece of Lucasfilm. But will Lucas ever take his Empire public?
May 19, 2005: 10:55 AM EDT
By Paul R. La Monica, CNN/Money senior writer
If Lucasfilm ever went public, Wall Street would say,
If Lucasfilm ever went public, Wall Street would say, "George, I am your father!"
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Even if you are not planning to see the movie, it will be almost impossible to miss the marketing hype. CNN's Chris Huntington reports.
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NEW YORK (CNN/Money) - "An IPO? Hmmm. Raise money, you will."

That's what we imagine Jedi master Yoda would say to George Lucas if the two were having a conversation about taking Lucasfilm public.

Lucas, of course, is intensely private, so the odds of him subjecting his company to the intense scrutiny of Wall Street are probably about as likely as the despised Jar Jar Binks being named by movie fans as the most popular "Star Wars" character of all time.

Money probably isn't an issue either. Lucas already is worth $3 billion, according to Forbes magazine's latest annual ranking of the world's wealthiest people. And a company spokeswoman said that Lucasfilm has no plans for an IPO.

Still, with the final Star Wars film -- "Episode III: Revenge of the Sith" -- opening on Thursday and Lucas media mania at an-all time high, we figured it would be fun to take a look at how a public Lucasfilm might be received by investors.

"Main Street would be all over the stock," said Tom Taulli, co-founder of Current Offerings, an independent research firm focusing on IPOs. "It would be similar to what's happened with Pixar -- a group of people would buy the stock because they like the movies."

The sales are strong with this one

Since Lucasfilm is private, one can only speculate about the company's financial health. The Lucasfilm spokeswoman would not comment about the company's revenues or profits. But according to data from Goliath, a subsidiary of Thomson Financial, Lucasfilm had estimated sales in fiscal 2004 of $1.05 billion.

To put that in perspective, that's more than what analysts expect the combined sales of Pixar and DreamWorks Animation will be this year. Assuming that Lucasfilm is also making money as well, as is widely believed, then you have a recipe for a strong IPO.

"The content has a global appeal to a mass audience and the company has been incredibly profitable with its theatrical releases, home video sales and product merchandising," said Robert Routh, an entertainment analyst with Jefferies & Co. "I don't think it would be a hard deal to get done. A lot of people would love to get a piece of Lucasfilm."

So what could a public Lucasfilm be worth?

We did some quick back-of-the-envelope math to come up with an admittedly rough guess for a valuation. Pixar (Research) currently trades at about 20 times estimates for this year's sales while DreamWorks (Research) has a price-to-sales ratio of about 6.

If you split the difference, for a price/sales ratio of 13, and conservatively estimate another $1.05 billion in sales this year, you'd come up with a market value of around $13 billion. Not too shabby.

Wall Street is the dark side

Still, Star Wars junkies shouldn't start making room to hang their Lucasfilm stock certificate next to their poster of Princess Leia in a bikini from "Return of the Jedi" just yet.

Sure, Lucasfilm could clearly be spun by investment bankers as more than just a "Star Wars" box office story since it has several operating divisions, such as the company's Industrial Light and Magic special effects company as well as licensing, animation and video game units.

There also have been rumblings about a fourth movie in the Indiana Jones series being in the works.

But the company has made no comments about what films are in the pipeline. And that "Episode III" is the last Star Wars film would probably give many institutional investors pause. So if there were a time for Lucasfilm to go public, it probably would have been before "Episode I" came out in 1999, not now.

"Star Wars is a long-established franchise but the characters are dying out," said Dennis McAlpine, an independent media and entertainment analyst. "Wall Street is greedy and the main question it has is, 'What have you done for me lately?'"

At the end of the day, it would probably be too much of a hassle for the famously guarded Lucas to explain himself to fickle shareholders. He'd also have to deal with the grind of frequent financial filings to remain in compliance with regulators and the risks that come from not disclosing relevant information in a timely fashion.

"Lucas would be afraid of the Death Star that is the SEC," Taulli quipped.

For more about the Star Wars marketing blitz, click here.

Will the Sith put a dent in the economy? Click here.  Top of page


George Lucas
Star Wars
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