San Diego

Researchers at the University of Colorado thought they had tapped a rich vein of gold last year when a Silicon Valley entrepreneur pledged $250 million in shares for studies of cognitive disorders. But recent market falls have wiped 90% off the value of the shares, delaying some Colorado research plans and sending a warning to other institutions that accept such gifts.

The shares in BEA Systems, a business-software company based in San Jose, California, were due to be donated by the company's co-founder William Coleman and his wife Claudia. The couple planned to give the university around $50 million a year for five years to set up an endowment fund for research into areas such as developmental disabilities, Alzheimer's disease and strokes.

A funding pledge to back research at the Coleman Institute for Cognitive Disabilities (above) has been held up by the volatile stock market. Credit: UNIV. COLORADO

They gave an initial $15 million in cash early last year to set up the Coleman Institute for Cognitive Disabilities, based at the university's Boulder campus, and to set up 15 research projects, including studies of stem cells and nerve regeneration. The rest of the year's instalment of $40 million in stock was due to be paid last November. But the couple decided to delay the gift until 2006 when BEA's share price fell from more than $70 to less than $20 per share during 2001. With the price currently at just above $5, this autumn's $50-million donation may also be delayed.

The Colemans have donated a further $1.6 million to cover the income that the university would have expected to receive from its endowment, ensuring that the research projects continue. But without the security of an endowment, the university is wary of expanding too quickly and some projects have not progressed as rapidly as expected.

Shares are a common way of donating to universities, but most institutions have a policy of selling them immediately. Over the past two years, for example, the University of California, San Diego, has received a $20-million donation from computer scientist John Moores, chairman of the board at San Diego-based software company Peregrine Systems, and his wife Rebecca. The university sold the shares immediately, and ploughed the proceeds into a new centre for cancer research and patient care, due to open in 2004. The stock, which peaked at over $60 per share in early 2000, now stands at around 27 cents.

Patrick Mulvey, vice-president for development at the M. D. Anderson Cancer Center in Houston, Texas, says his centre was fortunate to lose only $600,000 in pledges when Enron went bankrupt in December. The Houston-based energy company had previously given $1.6 million to the centre. Stock market volatility is making donors wary of gifts of shares, Mulvey adds.