And Now for Something Completely Different

Special Purpose Acquisition Company

It has been nearly 50 years since the television comedy series Monty Python’s Flying Circus released their first film. Based on their first and second seasons, they named it “And Now for Something Completely Different.” Four years later, they would release the ever-quotable Monty Python and the Holy Grail. But the first film stood out for its absurd silliness that is sprinkled through all future films. The film reappeared on my Amazon homepage earlier this week. I assume because Amazon is spying on me. My three-year-old repeatedly demanded that I replay “The Fish Slapping Dance” short over and over on Father’s Day. Those videos were on YouTube. So, Amazon, or Roku, or everyone is spying on the Baldwin household.

There’s a point to all this silliness, I swear. It was a deal that transpired on Monday. But, I have to tell you, I love Bill Ackman’s latest acquisition. I want to show you the opportunity here.

Special Purpose Acquisition Company

Over the last few months, you’ve probably heard a lot about Special Purpose Acquisition Companies or SPACs. These are companies that act a lot like venture capital firms. Investors go out and raise capital. Then, they look for a private firm to acquire. As a result, a private company goes public through a “reverse merger.”

Over the last few months, SPACs got a pretty tough reputation. Many analysts said that deal-making in the SPAC space had entered a bubble. But I firmly disagreed. I am happy that the benefits of venture capital are being pulled forward. After all, the number of public companies has fallen by half since the early 2000s.

Now, I can discuss SPACs and how to arbitrage them in a future article.

What I want to discuss today is Bill Ackman’s latest deal. His investment SPAC Pershing Square Tontine Holdings is buying a 10% stake in Universal Music.

What is this Universal Music?

It’s the company behind Taylor Swift, Kanye West, and many other musicians. The SPAC successfully won the right to purchase this stake and bring the company public instead of having a private equity firm hold a stake and leave it on the private markets.

SPACs and Royalties
Source: https://umusic.co.uk/our-artists

This is positive because it allows ordinary investors to invest in the firm through Pershing’s SPAC and ultimately Universal instead of only accredited investors.

SPACs and Royalties

The other key benefit here is that the deal allows Pershing and other investors to cash in on the growing interest in music royalties. Every time a radio station, Netflix films, SiriusXM radio, and YouTube play a song, an artist receives a royalty payment from these platforms.

There are songwriter royalties and production royalties. And given that they act like dividends, they can pay off handsomely over the long term. So, when I say this is something completely different, I mean it. Royalties represent a different way to generate income from an asset. In the case of Universal, the firm has a robust catalog that can generate money from the music, live events, the value of those assets, and more.

In fact, Goldman says said that the music industry – which includes revenues of recorded music, music publishing, and live music – is about to explode. The industry will go from $77 billion in 2019 to $104 billion per year in 2030.

I like the royalty aspect linked to this booming industry.

Royalties in the music space are an exciting alternative investment. Long-term investors might be interested in learning more about them in the future. I’ve worked for a long time in alternative investments, and I have a few ways that you can tap into the music and other royalty-generating businesses.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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