In Royalties There Is No “One Size Fits All”
Each Investor and Issuer Has Different Needs
Investor’s Differences:
Size of position wanted in individual royalties purchased from various royalty issuing companies.
Willingness to participate with other royalty investors, if not acquiring all of the royalty offered.
Amount of Internal Rate of Return desired in various periods.
Length of royalty payment period.
Level of risk tolerance from, none to whatever is necessary to achieve desired return.
Issuer’s right of redemption terms and limitations.
Industrial sector of royalty issuer’s customer diversification, concentrated or diverse.
Knowledge of industry in which the royalty issuing company intends to compete.
Issuer’s Differences:
Amount of non-equity dilutive financing sought.
Ability to increase revenues in absence of additional funding.
Growth of revenues in past several years.
Existing debt or pledging of assets.
Sufficiency of profit margins to pay a royalty rate on future revenues, which may or may not include pre-funding revenues.
Assuredness of projected revenues.
Reasonableness of post funding projected revenues.
Benefit or penalty for exceeding revenue projection.
Minimization of royalty rate in return for assured levels of royalty payments.
Willingness to pay a significantly higher royalty rate for a crediting rather than a distribution of royalties.
Willingness of controlling royalty issuing shareholders to personally attest to the performance of investor protections.
A study of arthurlipper.com and REX-RIAR.com and a simpler approach REX-Basic.com will be useful for those considering the use of royalties as for either an investment or funding.
Arthur Lipper, Chairman © Copyright 2019 British Far East Holdings Ltd.
British Far East Holdings Ltd. All Rights reserved. May 20, 2019