PRINT THIS PAGE | E-MAIL THIS PAGE

Wednesday, September 30, 1998

School fund earns more than $20 million off Disney stock sale

HOUSTON (AP) - The state's public school trust fund earned more than $20.2 million off the controversial sale of its Walt Disney Co. stock, but the overall value of the fund has decreased by $2 billion, the Houston Chronicle reported Tuesday.

Motivated by complaints about sex and violence in films made by a Disney subsidiary, the State Board of Education voted in July to sell all 1.2 million shares of Disney stock held by the Permanent School Fund.

At the time, opponents accused the Republican-controlled board of basing its decision on misplaced moral outrage rather than good business sense.

But because the board sold when the stock was trading at a near high, the fund earned millions on the sale, according to figures from the Texas Education Agency.

Between July 14, when the fund began selling shares, and the close of trading Monday, Disney stock dropped by 34 percent - more than three times the 11 percent decline in the Standard & Poor's 500 during the same period. The S&P 500 is a widely used index of the stock-picking performance by professional money managers.

However, some board members said it's too soon to say the sale was prudent because factors other than the sale price must be considered, such as what investments replaced the Disney holdings.

"My guess is that since the day we sold (Disney), every stock in the portfolio went down," said board member Will Davis, D-Austin, who voted against the divestiture.

The value of the school fund has dropped from $18 billion to $16 billion in the past two months, said Texas Education Agency spokeswoman Debbie Graves Ratcliffe. However, she noted it is impossible to determine what investments were made with proceeds from Disney stock.

Despite the ongoing debate, Education Board Chairman Jack Christie said the decision to sell turned out to be wise.

"We sold high, and we reaped the profits, and if it happened to send a message at the same time, fine," said Christie, R-Houston.