Wonderful places to visit are not always great places to live. The way things were done in the past has been improved for the convenience and benefit of those living in the present. Even more beneficial for people is looking forward rather than backwards.
Revenue royalties are the new way, for most people, to both invest in and finance privately owned companies. Stocks and debt, are the old way.
Investors seeking higher income by purchasing from a company a percentage of their revenues, for an agreed period, benefit as the revenues grow, in part due to the expansion financed by the money they paid for the royalty.
The investor’s risk is minimal in the case of royalties purchased from established companies, since by using our approach the royalty payment is immediately deducted from the royalty issuing company’s account as soon as revenues are deposited in the company’s bank accounts. There are no complicated considerations relating to calculating the company’s profit or to the stock being influenced by market valuations.
The royalty investors have only two relevant concerns. The first is whether the issuer will have sufficient revenues to pay the anticipated royalties within the expected period, and the second is whether the revenues will increase at least as much as projected.
The royalty issuing company will have an ability to terminate the royalty by exercising a redemption right by paying the royalty investors a pre- agreed multiple of their cost of the royalty. The agreed multiple will be negotiated along with the other investor protections and terms of the royalty agreement. This redemption right is necessary to make the royalty attractive to the owner of the royalty issuing company. The company owners will likely want to terminate the royalty if and when they: wish to refinance the company, sell stock in the company or sell the company. They will also want to terminate the royalty when the company has sufficient free cashflow or can borrow the necessary money since the royalty payments are the same as pre-tax profits.
It is also important to note that the royalty investor has no ability to guide or influence the managers of the royalty issuing company, as do shareholders. Also, there is no need or responsibility for the Officers and Directors of the royalty issuing company to treat royalty investors as partners or investors, as is the case with stockholders. It is so simple.
The royalty is a contractual agreement between the royalty issuing company and royalty investors to share revenues. There are obligations and remedial penalties for contractual non-compliance. The royalty investors get paid the agreed amount of revenues off the top, as soon as the royalty issuing company receives and is required to deposit its revenues. It is pure business, and requires no guesswork or time-consuming calculations of profit.
Our approaches are fair, provide excellent investor capital protections and can be terminated, on investor favorable terms, by the royalty issuing company.
More information will be found at: arthurlipper.com and the 6 website calculators available through REX-Basic.com. Softcover and eBook editions of two of my books Revenue Royalties and Off The Top are available at amazon.com.
Contact me if I can be of service or answer any questions.
Arthur Lipper, Chairman
British Far East Holdings Ltd.
+1 858 793 7100
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