Pixar floated its stock the week Toy Story opened, turning losses into $1.5bn

Pixar spent 1991 to 1995 as a hardware and software shop that happened to be making a film. Its first annual report shows net losses of $3.4M in 1992, $1.2M in 1993 and $2.4M in 1994, an accumulated deficit of $40.7M at the end of 1995, and a note payable to its own majority shareholder for $2.4M — Steve Jobs was still personally lending the company money as Toy Story was finished. The lifeline was a 1991 feature-film agreement with Disney covering three films, on which Disney financed production and kept most of the economics.

The decision came in November 1995. With Toy Story — the first feature made entirely with computer animation — at No. 1 at the American box office, Pixar sold 6.9 million shares at $22, netting about $139.7M. The stock opened at $47 and closed its first day at $39, giving the company a market value near $1.5B; Jobs, who held 80 percent of its 37.4 million shares, became a billionaire that afternoon. The prospectus was candid that Pixar's own cut of the hit was thin — on a $150M box-office take the studio expected roughly $30M of revenue under the Disney terms.

That is the point of the move. Listing gave Pixar its own balance sheet while its bargaining power with Disney was at its highest, and its first report as a public company showed the accounts turning: $25.3M of net income in 1996 after losses every year from 1992 through 1994. In January 2006 Disney paid $7.4B in stock for the studio — by then the strongest animation brand in the world.

1996 net income of $25.3M after years of losses; $139.7M net IPO proceeds and a $1.5B day-one market value; sold to Disney for $7.4B in 2006

Ten years of deficits and a note payable to Jobs show the company was one funding gap away from a forced sale; the Disney deal alone could not carry it.

The 1991 Disney agreement financed production but left Pixar a thin slice, so a hit film did not by itself fix the balance sheet.

Going public days after the premiere let investors price the studio on the film's evidence rather than on its accounting history.

Cash from the IPO removed the pressure to accept whatever terms Disney offered for the next films.

When one customer controls your economics, proof you can stand alone is worth more than the next contract. Ship the work that proves the model, then let the market price you.

Pixar's profits became the point of the story rather than the footnote: Disney's earnings from Pixar's first six films were estimated at about $3.2B, mostly from home video. Talks over who kept the sequel and merchandising money broke down in 2004, and in January 2006 Disney's new chief Robert Iger paid $7.4B in an all-stock deal for the studio that had nearly been sold off a decade earlier. Jobs joined Disney's board as its largest individual shareholder; John Lasseter became chief creative officer of both animation studios.