Securitization of sales participation certificates

• US 20030204473A1
• Filed: 04/24/2002
• Published: 10/30/2003
• Est. Priority Date: 04/24/2002
• Status: Active Grant

• Current Assignee: Tykhe LLC
• Original Assignee: Tykhe LLC
• Inventors: Schulman, Henry Evan C.
• Granted Patent: US 7,149,719 B2
• Time in Patent Office: Days
• US Class Current: 705/64
• CPC Class Codes: G06Q 20/382 insuring higher security of transaction
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

The invention relates to financial products that provide a return that is a function of future sales/revenues, preferably gross sales/revenue, over a specified period of time. One embodiment of a method for creating such a financial product includes providing standard forms to an issuer and underwriter and standard terms to an issuer and investors. The terms to the issuer include providing capital to the issuer in exchange for a return that is a function of future sales over a specified period of time. The process further includes creating instruments representing investment in the financial product. The process creates the instruments in sufficient numbers and in appropriate denominations to facilitate trading in the financial product.

Claims

1. A method for creating a financial product comprising:

providing standard forms and terms to an issuer and to investors, the terms to the issuer including providing capital to the issuer in exchange for a return that is a function of future sales over a specified period of time, the terms to the investors being non-negotiable, the capital provided to the issuer being provided by investors investing in the financial product; and

arranging for the creation of instruments representing investment in the financial product in sufficient numbers and in appropriate denominations to facilitate trading so as to help provide liquidity in the underlying financial product.

2. The method of claim 1, wherein the specified period of time is between about 1 year and about 12 years.

3. The method of claim 1, wherein the issuer is an organization and wherein the future sales that are the subject of said terms are at least one of the future sales of the organization, the future sales of a subsidiary of the organization and the future sales of a division of the organization.

4. The method of claim 1, wherein the issuer is a combination of organizations that have combined to sell claims on their joint future sales.

5. The method of claim 1, wherein the method further comprises setting the function of sales using at least one of historical and expected growth rates for sales and using an appropriate discount rate;

and wherein arranging for the creation of instruments comprises creating the instruments in appropriate denominations such that the instruments are tradable securities given the then current market conditions.

6. The method of claim 5, wherein an appropriate discount rate is a discount rate that is mutually agreed upon by the issuer and investors in light of prevailing market conditions.

7. The method of claim 1, wherein the function of future sales is a trivial transformation of future sales.

8. The method of claim 1, wherein the function of future sales is a linear function.

9. The method of claim 1, wherein the terms to the issuer include providing capital to the issuer in exchange for a return that is a function of future sales over a specified period of time and for a security that expires worthless at maturity.

10. The method of claim 1, wherein information about the issuer'"'"'s obligations pursuant to said terms is capable of being generated at a low-cost relative to obtaining information about any one of (i) a residual equity claim, (ii) a borrower in a conventional commercial loan context, and (iii) a debt issue.

11. The method of claim 1, wherein the terms to the issuer include providing capital to the issuer in exchange for a percentage of future sales over a specified period of time.

12. The method of claim 11, wherein the percentage of future sales is between about 1% and about 10%.

13. The method of claim 11, wherein the cumulative percentage of future sales based on more than one issue is not substantially greater than 10%.

14. The method of claim 11, wherein the value of the issue exceeds about $1 million.

15. A financial product produced by a process comprising:

providing standard forms and terms to an issuer and to investors, the terms to the issuer including providing capital to the issuer in exchange for a return that is a function of future sales over a period of time, the terms to the investors being non-negotiable, the capital provided to the issuer being provided by investors investing in the financial product; and

arranging for the creation of instruments representing investment in the financial product in sufficient numbers and in appropriate denominations to facilitate trading in the financial product.

16. The financial product of claim 15, wherein information about the issuer'"'"'s obligations pursuant to said terms is capable of being generated at a low-cost relative to obtaining information about a borrower in a conventional commercial loan context.

17. An electronic data processing method for preparing to register a sales participation based offering, the method comprising:

receiving information regarding the amount of an issue desired by a potential issuer;

receiving sales information related to current sales and to sales growth rate for the potential issuer;

receiving discount rate information for the issue; and

calculating a function of future sales appropriate to service the issue.

18. The method of claim 17, wherein the function of future sales is a percentage of future sales.

19. The method of claim 17, wherein calculating a function of sales appropriate to service the issue comprises determining a percentage of future sales that is to be paid to investors such that the probable total amount paid to the investors discounted to present day dollars is substantially equal to the investment.

20. A system for preparing to register a sales participation based offering, the system comprising:

a memory for storing instructions; and

a processor in communication with the memory, the processor operative to utilize the instructions stored in the memory for;

receiving information regarding the amount of an issue desired by a potential issuer;

receiving sales information related to current sales and to sales growth rate for the potential issuer;

receiving discount rate information for the issue; and

calculating a function of future sales appropriate to service the issue.