In what may be the wave of the future, a company offering stock in rapper Eminem’s music royalties will soon hit the stock market. The new company owned by Royalty Exchange (a company that brokers royalties) called Royalty Flow filed with the U.S. Securities and Exchange Commission to raise between $11 million and $50 million via a Regulation A+ crowdfunding effort. This is a little complicated, but significant.
First is the fact that stock crowdfunding is now legal, which means that a company doesn’t have to undergo the expensive underwriting costs of an investment bank in order to be publicly traded. Royalty Flow expects to sell stock in some of Eminem’s future royalties for $15 per share, with a minimum investment of $2,250 (150 shares). It will then purchase anywhere from 15 to 25% of the available royalty stream, depending on how much money it raises.
Now here’s where it gets a little complicated. The royalties actually come from the FBT Productions, the company that signed and developed Eminem and owns his contract. The rapper’s personal royalty stream is not involved. To date, the Eminem catalog has sold 172 million albums worldwide, while Nielsen Music says 47.4 million of them have been sold in the United States. It’s also one of the most heavily streamed catalog’s online. 25% of FBT royalties for last year amounted to around $1.3 million, according to Royalty Flow.
This isn’t the first time that an artist has issued securities based on their catalog. David Bowie sold his famous “Bowie Bonds” in the early 1990’s in order to raise enough money to buy himself out of his management contract. James Brown, the Isley Brothers and Holland-Dozier-Holland, among others, have also issued bonds based on their publishing catalogs in the past.
Crowdfunding stock is a bit different and brand new, and may open up the door for more artists to do the same in the future though. Expect to see some other major artists, management or production companies attempt the same in the future.