[Chapter 417: Pixar Animation Goes Public, Guess Pictures' Market Value Doubles]
In the third week since Toy Story's release, it earned $25.03 million in North American box office revenue, breaking the $100 million mark domestically, making it the fourth Guess Pictures movie this year to surpass $100 million in North American box office.
"Guess Pictures' films in the second half of the year have just been on fire," Michael Ovitz marveled.
Before September, many media outlets joked Guess Pictures was trending downward and might lose the annual box office champion title. But now, everyone had clearly underestimated Guess Pictures and Link.
Michael Eisner smoked his cigar, pointing at a headline in the Wall Street Journal. "Pixar Animation Studios is about to go public. What do you think about that?"
"The last time I called Link, he told me that if Disney backed Pixar's development, by year-end they could buy a stake in Pixar. I thought he was gearing up to fund Pixar quietly, but now it looks like he's more aggressive, pushing for Pixar to go public directly. It's a bold yet very smart move," Ovitz said.
Ovitz looked at Link's photo in the paper, which had a headline reading 'Hollywood's King Link's New Move: Pixar Animation Studios Plans to Go Public on December 20'. Eisner nodded in agreement.
They considered Link's move bold because Pixar was, at that point, just an animation studio with only one film made. Although Toy Story had decent box office, its stock market performance was uncertain. A failure could impact parent company Guess Pictures.
But the move was smart because Toy Story's release massively boosted Guess Pictures' market value and profits by hundreds of millions. Many in the financial world envied Guess Pictures' earnings and were eager to get a piece.
Earlier, after rumors of Link and Diana surfaced, the media tried to smear Link's reputation, using public opinion as a weapon to pressure Guess Pictures to accelerate funding and public listing.
But no one expected Link would skip Guess Pictures going public and instead float the subsidiary Pixar Animation first. Like throwing a bone to a pack of hungry wolves; this not only eased external pressure on Guess Pictures' development but also let them reap the benefits while the wolves fought each other. It was a brilliant move.
"This bastard is obviously a director, but instead of focusing on filmmaking and winning Oscars, he's always thinking about how to make money and grow the company. Totally off track," Ovitz said irritably.
"This is probably Steve Jobs' plan. Jobs wanted Pixar to go public to raise funds for computer animation research. Link agreed after acquiring Pixar," Eisner noted.
"Jobs is a tough guy himself. With his help, Link's going to be even harder to deal with," Ovitz cursed. "Mike, should we buy Pixar stock now that it's going public?"
"Let's see how it goes," Eisner squinted, continuing to read the paper.
...
The news about Pixar going public was extensively covered by Wall Street Journal, Los Angeles Times, Business Daily, ABC, and others, causing a major buzz in both finance and entertainment circles.
Toy Story had a $30 million production budget, and though it wasn't the fastest movie to hit $100 million this year, it was the cheapest. This proved computer-animated movies had huge potential, and Pixar was a promising studio, essentially a golden goose.
With Guess Pictures -- Hollywood's most profitable company -- backing Pixar, the future looked even brighter.
Most investors were optimistic about Pixar's prospects and poised to buy shares when it went public. But many in Hollywood hoped Pixar would fail at going public; if its stock flopped, it would be a humiliating retreat.
That hope was because Guess Pictures was already so strong -- if its subsidiary Pixar succeeded, Guess Pictures would have both capital and technology, making competition tough for other studios.
Everyone was watching to see if Pixar's IPO would be a success or failure.
---
On the eve of Pixar's IPO, the North American box office entered the competitive Christmas season.
Guess Pictures didn't release a new movie this week, but a Guess-backed film starring Tom Cruise and Renee Zellweger, Jerry Maguire, premiered, distributed by Columbia Pictures. It did well, earning $33.16 million in 2,531 theaters in its first week to take the box office crown.
Paramount's animated film Beavis and Butt-Head earned $20.11 million, coming second. Toy Story dropped to third with $18.44 million, reaching a cumulative $121 million. Scream earned $5.09 million this week and neared $98.35 million total, expected to break $100 million soon.
Dangerous Minds, released in April, made $305,000 this week, totaling $96.16 million, with a chance of hitting $100 million. Including the upcoming release of The English Patient, Guess Pictures' total box office for the year would likely surpass last year.
However, the biggest Hollywood news wasn't Jerry Maguire's box office success, but Pixar Animation's IPO.
---
On December 15, a week before Christmas, thanks to efforts by Guess Pictures' executives and Steve Jobs, Pixar Animation Studios went public on the New York Stock Exchange under the ticker PIXR.
The initial price was set at $14 per share, valuing Pixar at $1 billion. Jobs believed Toy Story's strong box office and the optimistic investment sentiment justified raising the price to $22. Link agreed.
Jobs' prediction proved right. Within half an hour of opening, major investment firms like Vanguard Capital, J.P. Morgan, Goldman Sachs, and Glimmer Capital bought large Pixar share volumes.
Pixar's stock price jumped swiftly from $22 to $45, and its market value soared to $3.2 billion, almost a bubble.
Due to overwhelming demand, many trades faced delays. By afternoon, the stock price climbed to $52 and closed at $43.
Pixar's market value more than octupled since last year, reaching a remarkable $3.1 billion.
After the IPO, Guess Pictures held 46.3% of Pixar's shares, Steve Jobs retained 1.2%, Disney purchased 12.17%, and the rest went to Wall Street firms and individual investors.
Guess Pictures earned $1.5 billion from the deal; Link personally took more than $700 million. Jobs and Pixar's key executives split about $200 million. Other shareholders and management shared tens to hundreds of millions.
Because Guess Pictures owned nearly half Pixar's shares, its own market value surged, with Wall Street valuing it at $6.5 to $7 billion, making it the fourth largest movie company, behind Disney, Warner Bros., and Paramount.
...
"$3.1 billion? How could a small studio like Pixar be worth that much? Those investors must be nuts!" Michael Ovitz was stunned, staring at the numbers as if someone hit him on the back of the head.
He recalled when he called Link to discuss buying Pixar for $2 billion. He thought Link was asking crazy prices and bargained down to $1 billion, which Link refused, insisting $2 billion was the floor.
Ovitz hadn't pushed further, sensing Link didn't want to sell. But after Pixar's IPO, the valuation skyrocketed to $3.1 billion, nearly double the $1.8 billion Link rejected. If he had bitten, he could have made over a billion dollars flipping Pixar stock.
He had been in Hollywood for over 30 years and never made that kind of money.
Ovitz felt the pain deeply. If he could rewind time to when Link offered $2 billion, he would have snapped it up and pushed for Pixar's IPO, making a huge profit, leaving Link regretting.
Too bad time didn't rewind.
Ovitz forced a bitter smile.
"Mike, don't regret the Pixar deal," Eisner advised. After talking with Link, Ovitz had shared the negotiation details with Eisner, who also disagreed with the $2 billion buyout.
"Pixar's IPO success and market surge are partly due to the potential of computer animation tech and partly due to Guess Pictures' reputation. Investors buying Pixar stock are also betting on Guess Pictures' production capacity. If it were us managing it, Pixar might not have crossed $3 billion."
Ovitz nodded begrudgingly. Though it might not have hit $3 billion under their management, Pixar's success showed huge potential, making a $2 billion purchase worth it. Unfortunately, neither had the guts at the time.
"Link is filthy rich now," Ovitz admitted with envy and resentment.
Originally worth $6 to $7 billion, after this operation his worth topped $10 billion. With other investments, Link's net worth was at least $14 billion, just a few billions shy of the richest man on earth.
Back at the Oscars party years ago, Link didn't even have the status to meet insiders. Now, four years later, he was a man Ovitz had to look up to.
Damn it!
Eisner waved his cigar and said, "Don't think too much; it won't help. Link is a formidable player. Be careful when doing business with him.
Now that Pixar's IPO boosted Guess Pictures' power, and their box office share will grow, squeezing other studios, we need to figure out how to keep our company profitable when facing Guess Pictures' competition, so we don't fall behind."
"I get it. Any suggestions?"
"Guess Pictures grew too fast. Our seven big studios teamed up and still couldn't stop them. Now we have to cooperate, mainly in animation.
Pixar has the tech, Disney has countless animation IPs and talent. Deep cooperation will secure Disney's advantage in animation.
It's also good for Guess Pictures, and I believe Link won't oppose it," Eisner said slowly.
Ovitz nodded. It was a good plan. Disney had been animating since the 1920s, owning countless classic IPs and dominating animation distribution.
Pixar brought tech patents and Guess Pictures' financial backing.
Their collaboration was a win-win.
His only gripe was Guess Pictures would benefit more, increasing Link's power in the industry, to the point no one could challenge him.
But they couldn't avoid partnering with Guess Pictures. Disney's foundation was animation,
and without an alliance with Guess Pictures, their base would be shaken, even threatening company survival.
So joining forces was a necessity, not a choice.
Thinking this, Ovitz's frustration deepened. Had he known Link was such a threat back in '93 when Link was a nobody, he would have crushed him with the strongest measures -- kick him out of Hollywood or make him disappear.
But it was too late.
The only solace was that the 'poison pill' plan hadn't been discovered by Link yet. Hopefully, it would make Link stumble hard, letting Ovitz vent some frustration.
*****
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