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I'm surprised that Johnson and Johnson wouldn't want to immediately snap up any available royalties that they could. Getting rid of perpetual royalties seems li
by pg_bot 4y ago
I'm surprised that Johnson and Johnson wouldn't want to immediately snap up any available royalties that they could. Getting rid of perpetual royalties seems like an absolute no brainer to me if I were the CEO of JnJ.
- DwnVoteHoneyPot 4y agoRoyalties are equivalent to the lump sum cash paid for it. You should be indifferent to holding the cash vs. holding the rights to royalties.
- Consultant32452 4y agoCash is king, royalties may dry up tomorrow.
- spoonjim 4y agoThere is also an administrative cost to auditing and paying these royalties.
- kingcharles 4y agoRight, it's not insignificant. Buying up all the available royalties would reduce this factor to zero for JnJ.
- spoonjim 4y agoThere might be so many individual holders that buying up all the royalties would be infeasible and they are not even going to try. I can imagine with inheritances from 1881 the royalty stream might be owned by 100+ different entities by now.
- Traster 4y agoI could be wrong about this, but you, as a third party should be indifferent to holding it vs cash. J&J shouldn't - if they owned this it would change the cost structure of selling the product. Let's say they buy it, they're now paying $x less in cost per unit, which from a static perspective is the same as the cash value of the royalty, but it could allow them to drive more money into advertising, which would yield more sales of the product. Previously this would've increased the value of the royalty (which they don't own) but now they capture that value instead.
- patentatt 4y agoIf it's for sale to the public it most likely means it's overpriced. Everyone who owns a share of it knows more about it than you, and the manufacturer itself has almost complete information. If they aren't buying it at this price, it's probably not worth it.