"One Of The Best Businesses We've Ever Owned"
“In a world of uncertainty, owning a royalty on music with the best management team in the industry is a blissfully comfortable and profitable place to be.” Bill Ackman — founder Pershing Square Capital Management — in a Twitter post last week.
Royalties — no matter what kind — are incredible investments.
We talked about them after we acquired our first music royalty for The Partners Fund.
One of the largest owners of music royalties is Universal Music Group (UMG).
Universal Music Group has a diverse portfolio of labels, artists, and brands.
Taylor Swift, Billie Eilish, The Weekend, Ariana Grande, Kendrick Lamar, and more were all signed under UMG.
The Beatles, Queen, ABBA, The Doors, The Rolling Stones, all worked under UMG’s label.
UMG collects a royalty any time an artists’ music gets played. From social media to streaming to television and movies to live music.
UMG has gross profit margins of 40-50% and net profit margins of around 17%.
It’s why we at The Partners Fund consider royalties one of our three “pillars” in our portfolio. We’re focused on acquiring top-tier music royalty assets.
Time Sensitive Announcement:
We’re raising $500,000 to acquire the lifetime rights to a couple of music royalties for two culturally iconic bands.
They have 6 Grammys and over fifteen nominations between them.
Please email us at investors@thepartners.fund if you’re interested.
We now have three music and TV royalties in the portfolio… including our first trophy music royalty asset — “Brick House” by The Commodores — which we acquired back in January.
UMG makes up 27% of Pershing Square’s $18 billion in assets under management — by far the largest position.
Ackman is a Warren Buffett disciple. So his preferred holding period is “forever” too.
However, Ackman announced Pershing is selling 2.7% of its stake, which should raise $1.4 billion for the firm.
But Ackman isn’t selling just to take some profits off the table. He’s selling in order to get UMG listed on one of the U.S. exchanges.
UMG is only listed on the Amsterdam Stock Exchange. Getting UMG listed on a U.S. exchange will make it more accessible to U.S. investors. Which, in turn, will increase liquidity on the stock.
This should “unlock” material upside in UMG’s stock. And make Ackman’s stake worth more.
Ackman said, “UMG is one of the best businesses we have ever owned.”
We agree. And it’s obvious why.
Royalties are a superior business model.
Good investing,
Lance
DISCLAIMER: This is solely our opinion based on our observations and interpretations of events. This should not be construed as personal investment advice.