We can legitimately wonder whether the traditional securities are sufficient to answering the modern investor’s needs, Are not you fed up to invest in basket of securities or in large fortune 500 companies that are baskets of subsidiaries ?
Upto now, securitizing intellectual property only meant using it as collateral like David Pullman the banker who created and sold the Bowie bonds also known as Pullman bonds. These bonds were asset-backed securities which used the current and future revenue from albums recorded by musician David Bowie as collateral.
Imagine the possibility of investing selectively in one movie, one patent, one song, one book, one design you truly believe in. Imagine getting rid of most of the dark side human factor, like poor management or excessive spending… would not it be great ?
Enters my invention: Intellectual Property Securities or “IPS” !
Definition
Intellectual Property Securities are pass-through securities, also known as a pass-through certificates oder pay-through securities.
Ein Intellectual Property Security security is a royalties stream backed by an intellectual property asset such as a movie, a patent, a song, a book, a design or any other registered intellectual property.
A servicing intermediary collects the royalties payments from the issuer and, after deducting a small management fee, remits or passes them through to the holders of the intellectual property pass-through security.
The term Intellectual Property Security relates to the transaction process of securitizing intellectual property. It involves one or more intellectual property assets. It originates with the licensee’s payments, which pass through an collecting society before being released to the investor.
Launching Movie Securities
The first type of IPS we intend to launch is a movie-backed certificate, in which the movie distributors’ and movie licensees payments pass through a collecting society before reaching investors.
An IPS like any pass-through is a derivative based on certain royalties streams and providing the investor a right to a portion of those royalties. The royalties streams arise from underlying assets, which can include any intellectual property assets as already listed above.
Composition of an Intellectual Property Security
Jedes Wertpapier kann von einem einzelnen geistigen Eigentumsvermögenswert bis zu einer großen Anzahl von geistigen Eigentumsvermögenswerten in beliebiger Kombination stehen.
Wenn es eine Reihe von geistigen Eigentumswerten gibt, können diese unterschiedlicher Art sein, wie das Portfolio von Rechten, die in einem Film kombiniert sind, einschließlich Bildrechte, Musikrechte usw.
Die Zahlungen an die Investoren erfolgen regelmäßig entsprechend den in den Filmlizenz- oder Vertriebsvereinbarungen festgelegten Zahlungsplänen.
Risks Associated with Intellectual Property Securities
Das Risiko eines Ausfalls der mit den Wertpapieren verbundenen Schulden ist ein allgegenwärtiger Faktor, da die Nichtzahlung des Schuldners zu geringeren Renditen führt. Sollten genügend Schuldner ausfallen, können die Wertpapiere grundsätzlich an Wert verlieren.
Another risk is tied directly to current interest rates. If interest rates fall, there is a higher likelihood that current debts may be refinanced to take advantage of the low interest rates. This results in smaller interest payments, which mean lower returns for pass-through securities investors.
Prepayment on the part of the debtor can also affect returns. Should a large number of debtors pay more than minimum payments, the amount of interest accrued on the debt is lower. Ultimately, these prepayments result in lower returns for securities investors. In some instances, loans will have prepayment penalties that may offset some of the interest-based losses a prepayment will cause.
