Compact discs were replacing records when Jeff and Mark Bass took a chance on a young white rapper named Marshall Mathers. Eminem, as he’s known, blossomed into one of the world’s most popular musicians.
Now the brothers, who still own part of Eminem’s catalog, want to cash in. They’ve agreed to sell up to 25 percent of their interest to Royalty Flow, which will buy the stake with money raised in what’s called a mini initial public offering, company executives said. They plan to file Monday with the U.S. Securities and Exchange Commission to sell shares to the public in a Regulatory A+ offering and will ultimately seek an exchange listing.
Music fans and investors have little opportunity to invest directly in the music business, where the biggest players are closely held or parts of larger corporations. Thanks to a 2012 law that made it easier for small businesses to raise money, investors who believe the growth in streaming will make Eminem’s catalog more valuable will be able to buy a slice. Spotify Ltd. will be another opportunity, when it goes public.
“If you’re a fan and wanna bet on that artist, you’ve got some skin in the game,” said Joel Martin, a business partner of the Bass brothers. “It takes the average investor and puts them in a position they wouldn’t be in before.”
Royalty Flow is looking to raise $11 million to $50 million, founder Matt Smith and Chief Financial Officer Jeff Schneider said in an interview. The Bass brothers agreed to sell 15 percent of their interest and are in line to get the first $9.75 million from the stock sale, or $18.8 million if they commit to selling 25 percent. Any additional capital will go to the Denver-based company to buy more music rights and, eventually, pay dividends.
Smith comes to the deal through his 2015 purchase of Royalty Exchange, which has held about 180 auctions of music rights. Smith…