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Quote of the Day
“Tom Murphy and Dan Burke were probably the greatest two-person combination in management that the world has ever or maybe ever will see.”
-Warren Buffett. Murphy and Burke ran Capital Cities Broadcasting, an incredibly successful company, who purchased American Broadcasting Companies (ABC) on this day in 1985.
March 19th – This Day in Stock Market History
March 19th, 1985 – Capital Cities Communications announces a $3.5 billion purchase of American Broadcast Companies (ABC). At the time, the deal would be the largest non-oil and gas business transaction in history. Warren Buffett helped finance the deal in exchange for a 25% stake in the new company.

Front page New York Times coverage of the ABC/Capital Cities merger on this day in 1985
Cap Cities is one of the great business stories of the 20th century. Run with the leadership of Tom Murphy (Who now sits on Berkshire Hathaway’s board), Capital Cities started with an IPO on December 11th, 1957 with a total market cap of $299,000.00 (52,000 shares at $5.75) – That’s a compound annual growth rate of about 39.7% from 1957 to 1985. But the fun was hardly over for long term shareholders…
ABC/CapCities would be purchased by Disney in 1996 for $19 billion. In all, Capital Cities value would rise from $299,000 in 1957 to $19 billion in 1996 under Murphy’s leadership – a compounded annual growth rate of 32.79% over his reign, one of the best long term records in all of business.

Chart of Capital Cities growth from William Thorndike Jr’s book, The Outsiders
March 19th, 1992 – AOL IPOs at $11.50 per share.
America Online, Inc. goes public on NASDAQ at the original price of $11.50. AOL would close at $14.75, up 28.3% on the day. On the day of it’s IPO, AOL would have a market cap of $62 million.
AOL stock price history

Chart from Denver Post
By the end of 1999, AOL would be worth more than $100 billion, making a $100 investment at AOL’s IPO worth more than $28,000.

Of course the growth story would not last. America Online would become synonymous with the late 90’s internet bubble. By 1999 AOL’s shares rose more than 700-fold and AOL would end up purchasing Time Warner at the peak of the internet bubble for $182 billion including debt. Just 2 years later, more than $100 billion in value would be written off.
By 2009, AOL would be spun off from Time Warner to become its own stand alone company with a market cap of about $3.3 billion, down more than 97% from AOL’s tech bubble highs.
Best March 19th in Dow Jones Industrial Average History
1904 – Up 1.77%, 0.62 points.
Worst March 19th in Dow Jones Industrial Average History
2008 – Down 2.36%, 293.0 points.
Read of the Day
The story of Capital Cities is truly amazing. Especially considering that Murphy had no experience in the broadcast business prior to agreeing to run WTEN, a TV station that Murphy’s friend purchased out of bankruptcy in 1954. Burke was hired on at the age of 31 and also had no experience running a broadcasting company (Burke was a project manager in the JELL-O division of General Foods prior to).
The entire story is told in William Thorndike’s must read book, The Outsiders
: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
The first chapter of the book is titled ‘A Perpetual Motion Machine for Returns’, and is about Capital Cities rise.
<— Go to previous day: March 18th, 1852 – Wells Fargo & Company founded by Henry Wells and William Fargo with $300,000 in capital.
Go to next day: March 20th, 2000 – Barron’s calls the tech bubble top with the cover story of “Burning Up”, warning investors to be cautious at the tech bubble peak. —->