Royalties Are Better

Comparing the Titanic to modern cruise ships is like comparing the owner benefits of old-fashioned equity-based financing to using royalties to obtain growth capital

Both can create the same amount of money for the company. The sale of stock reduces the ownership of the original shareholders and creates fiduciary obligations limiting some controlling shareholder advantages.

A royalty reduces the issuer’s profit margin until the company utilizes and benefits from the amount paid for the royalty.

Investors, having only bought the stock with the intention of selling it at a profit, based on the company’s profitability, are concerned by executive compensation levels, research expenditures and other expenditures reducing profits.

Royalty investors, sharing only a percentage of revenues for an agreed period, and neither having a vote nor any company ownership, are not concerned with other than the company’s sustainability and growth of revenues.

Royalties can have minimum payments, be guaranteed, have effective investor protections and be structured to return to investors a greater return than other alternative investments, if the projected revenues are achieved.

Royalties can be redeemed by the issuer at multiples of investor cost. Issuers may also have an ability to redeem royalties annually on an agreed term, thus reducing the company’s overall royalty payment obligations.

A royalty issued by a revenue generating company can produce immediate returns, with quarterly distribution of royalty payments, as royalties can be required to be paid by the issuer on receipt of revenue.

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