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Taking Stock of Star Wars Prequels: How to Trade Office Hours for Top-Dollar Equity



Anders Hove

Investing is getting crazy these days, and I don't just mean big volatility due to what the ever-so-tactless business commentators call "exposure to Asia." Every investment seems to come with some sort of complication or string attached. You have your futures and options, your derivatives and currency hedges - instruments which are now trickling down from market-makers to small, Main Street investors.

Take the case of director George Lucas, for example. Lucas is essentially a struggling artist, with a paltry few hundred million dollars under his mattress. He's the type of person an old-style banker wouldn't have trusted with a pass-book. A typical investment strategy for a person of Lucas' calibre two decades ago would have been a risky land scheme run out of a local savings and loan, ideally represented by a small law firm in Little Rock.

Lucas' current project is a three-installment series of B-movies along the lines of his previous obscure work, Star Wars. By most accounts, Lucas will continue to employ state-of-the-art special effects using barely glued-together plastic models and painted-on laser light effects. In short, not the sort of project you or I would want to bet the farm on. Or in current investment lingo, it's not the sort of public offering we would go long on forward-backward pork-belly derivatives for.

Major business firms have taken a different tack on the Star Wars prequels, however. Pepsi has agreed to a multi-million dollar promotional deal with Lucas and, in the biggest turnabout, plastic-mavens Hasbro and Galoob Toys have proven willing to fork over $325 million in stock to Lucas for the merchandise rights to the movies. And that's without even seeing the movies.

The upshot (for Lucas, anyway, if not molded-plastic figurine sophisticates everywhere) is that he now owns 5 percent of Hasbro and 20 percent of Galoob. This is according to Business Week magazine, a reasonably reliable source in these times of both artistic and market confusion.

In other words, individual workaday folks like Lucas can now barter work for stock. That's what so many employees at Microsoft have been doing over the years, to the point where many are now millionaires. But more than that, it means that one can trade an individual product or piece of work for a share of someone else's. Primitive market instruments like cash are now pass. Such high velocity! Such a low rate of return! Tch.

Unfortunately, I get the impression that few people from MIT are taking advantage of these sorts of investment opportunities. And I admit that when I first hit upon the idea myself, it was rough going.

The first company I approached was Disney. Would they be prepared, I asked, to give me a 10 percent stake in their firm in exchange for merchandising rights to my next five "Balkan Subversive" columns? Frankly, by the kind of response I got, you'd have thought I was one of the brothers Warner.

At this point, I realize my initial efforts were overly optimistic. But all hope has not been lost. There is still the outside possibility I'll be able to trade the promotional rights to "Balkan" for a few grilled-cheese sandwiches at Frescoes.

Meanwhile, others are beginning to follow my lead. I hear Course VI professors are contemplating trading office hours for options on students' future earnings. And I hear the administration is contemplating spinning off its highly-oversubscribed Dormitory Division as a for-profit corporation.

Taken together, I'm not sure whether the move toward more complicated partnering agreements between financial entities is a good thing. George Lucas can do whatever he wants to without complaint from me. But what if Microsoft offers to unbundle its browser from my desktop in exchange for a lucrative promotional agreement? I could use the money, but would it be right? By the way, have you installed Word 6 yet?