Royalty Flow: The IPO That Makes Investing In Music Possible

Today, the Royalty Flow IPO went live. This means fans, investors, and really anyone can now place their order for shares in a company that was created to acquire premium, royalty generating catalogs of music and other media.

We did this because after nearly 15 years of declining revenues, the music industry has turned the corner. Following a slight increase in 2015, recorded music industry revenues increased 6% globally last year, and over 11% in the U.S. That’s the first year of double-digit growth since Napster.

At Royalty Exchange, we’re confident we’ve only seen the start of that recovery, and we’re not the only ones. That’s because streaming is the format driving this growth, to the tune of $3.9 billion worldwide last year, and its impact is only beginning to be felt.

Goldman Sachs analyst Lisa Yang predicts global music industry revenues will increase to $41 billion by 2030, with paid and ad-supported streaming contributing $34 billion of that total.

That’s what investors call a bull market. But until today, there’s been no way to participate directly in it. Record labels, the main beneficiaries of this bull market, are not stand alone public companies. Two of the three majors are part of much larger public conglomerates, and the third is privately held.

Enter Royalty Flow.

Royalty Flow was created to provide direct access to not only the music business, but to cherry picked assets that have a track record of royalty income and are likely to disproportionately benefit from the boom in music streaming.

The first such catalog Royalty Flow intends to acquire with IPO proceeds is a portion of the sound recording royalties held by the former producers of hip-hop superstar Eminem — FBT Productions.

Audited financials for this catalog show a 43% increase in earnings from 2015 to 2016. That reflects a 76% increase in revenues generated by streaming services.

And updated financial results reveal that growth in this catalog continues to accelerate. Mid-year 2017 earnings grew 39% over the last half of 2016. And streaming income generated about $2 million in the first half of 2017 vs. $2.3 million for ALL of 2016. For full details of the catalog’s performance, please read the offering circular.

These results represent not only the bar by which Royalty Flow intends to evaluate future catalogs to acquire, but also validates the thesis that great assets can disproportionately benefit from industry growth.

So that’s the why. Here’s the how.

Royalty Flow is conducting a ‘mini-ipo’ using Regulation A+ of the JOBS ACT to raise the capital needed to acquire the Eminem and other catalogs. Regulation A+ allows anyone — not just accredited investors — to provide funding to startups in return for equity. It caps the amount raised to $50 million, and requires fewer disclosures than more traditional IPOs.

Royalty Flow aims to raise at least $11 million through this process, but will accept up to the $50 million limit. The minimum investment during the IPO is $2,250 for 300 shares (at $7.50 a share).

Unlike other Regulation A+ offerings, though, Royalty Flow is holding itself to higher standards of governance. That’s because Royalty Flow intends to list directly to NASDAQ after the equity campaign is over.

NASDAQ’s disclosure requirements are more stringent than those of Regulation A+. These standards include:

• an independent board of advisors.
• compliance with the periodic reporting requirements of the 1934 SEC Act.
• Shareholder approval for certain transactions related to issuing additional securities and equity compensation.

Whether reserving Royalty Flow stock through the IPO, or later through a public exchange, shareholders will be eligible to earn dividends based on the performance of the catalogs Royalty Flow holds. This starts with the initial FBT-Eminem catalog, but Royalty Flow intends to acquire additional such assets over time.

Other notable highlights for investors include:

• a lean organization with minimal staff designed to keep costs low and maximize dividend potential.
• direct exposure to music and media royalties available on a public exchange.
• passive assets that require minimal overhead thanks to partnerships with established operating partners.

In the weeks since Royalty Flow publicly filed on Sept. 25, investor interest in this opportunity has been overwhelming. More than 9,500 individuals have signed up to receive more information and get notified when the shares are available to reserve.

One of them is Tom Wetherald, an independent investor who previously managed the $1 billion small cap MFS New Discovery Fund before retiring three years ago. Here’s what he has to say about Royalty Flow:

“What I try to do as a small cap investor is envision how companies can become much larger, like 5x or 10x their current size. There are not many companies where you can lay out a plausible situation where that can happen. But with Royalty Flow, I can see how that happens. This absolutely does not mean it will, but at least I can see how it could.”

We believe Royalty Flow can revolutionize music financing for the vast community of contributing songwriters, producers, and other artists that support the superstars we know and love. As with FBT Productions, Royalty Flow allows “behind-the-scenes” artists to raise capital on favorable and flexible terms.

For investors, Royalty Flow provides access to an asset class historically limited only to a handful of professional and institutional investors. Music royalties hold great potential by virtue of their being uncorrelated with the stock market, paid out on an established and regular basis, and especially today, given the new bull market in music.

Interested investors can just click here to get started. And if you’re among the hundreds of thousands of rightsholders working behind the scenes interested in adding your catalog to the Royalty Flow holdings, simply contact us directly.

Forward-Looking Statements

The content above contains forward-looking statements that are subject to risks, uncertainties and assumptions. All statements addressing events or developments that Royalty Flow expects or anticipates will occur in the future, including but not limited to, the success of its offering campaign, listing on a securities exchange and development of a market for its securities, and its business strategy, including acquiring future royalties. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties, all of which are outlined in the company’s offering circular. Except as required by law, Royalty Flow disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in the content above.

Legal Disclaimer

The offering will be made only by means of an offering circular. An offering statement on Form 1-A relating to these securities was filed with the Securities and Exchange Commission and was qualified on Nov. 22, 2017. You may obtain a copy of the offering circular contained in the offering statement at the following link: https://www.sec.gov/Archives/edgar/data/1709847/000147793217005751/royalty_1a.htm.

You should read the offering circular before making any investment.

The content above shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. No money or other consideration is being solicited at this time with respect to such an offering, and if sent in response to these materials for such an offering, it will not be accepted. Any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. An indication of interest made by a prospective investor in a Regulation A offering is non-binding and involves no obligation or commitment of any kind.

Our offering statement and any statements related to Marshall Mathers, aka Eminem, have not been approved or endorsed by Marshall Mathers.

The securities to be offered will be highly speculative. Investing in shares of Royalty Flow will involve significant risks. Investment will be suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the anticipated offering, it may not continue.

Due to state Blue Sky laws and timelines, residents of Michigan must wait until after Dec. 4, 2017 to reserve shares. Residents of Colorado, Iowa, Kentucky, Maine, Washington, and Wyoming can reserve shares immediately, but must wait until after Dec. 14, 2017 before any shares they reserve can close.

Purchasers of our Class A Common Stock may be limited in their ability to sell shares of our Class A Common Stock (a secondary sale) to any person in any jurisdiction where applicable state securities laws (Blue Sky Laws) prohibit or limit such sale.