Abstract:
A method for facilitating a royalty on the sale of stock is disclosed. The method includes trading a share of a company stock between a seller and a buyer, and charging a fee for each share of company stock traded. The fee is accrued at the sale of the share of stock. The fee is paid by the seller of the share of the company stock. Each particular share of company stock includes indicia relating to the fee, wherein the indicia may include a legend or covenant indicating a payment of a royalty back to the issuing company. Generally, the fee is paid back to the issuing company of the share of stock or to a successor in interest thereof. The fee is collected and distributed via a stock exchange.

Description:
BACKGROUND  
       [0001]     1. Technical Field  
         [0002]     The present disclosure generally relates to the field of securities trading, and more particularly, to a trading royalty process that provides revenue to a company through the subsequent sale of its stock post a public offering.  
         [0003]     2. Background  
         [0004]     The most common known manner of issuing securities is in the context of a public offering, and more particularly, an initial public offering or IPO. Private corporations use IPOs to create value and liquidity for their shareholders as well as to raise operating capital. When a company elects to have its shares publicly traded on a stock exchange, it engages an underwriter or investment banker to advise it and make a market for its particular stock.  
         [0005]     With reference to prior art  FIG. 1 , there is disclosed a flow chart detailing typical proceeds  10  from the sale of stock or shares  16  in a public offering. Typically, an underwriter such as an investment banker  14  will purchase a certain number of shares  16  at a set price from the issuer, company or original shareholders  12 , either by itself or through a syndicate of underwriters or investment bankers  14 . These investment bankers  14  then market the shares  16  to their clients with the hope of selling the shares  16  at an amount greater than the amount paid to the company and/or its original shareholders  12 .  
         [0006]     Alternatively, the investment bank  14  may simply market the shares  16  and the company  12  receives whatever value the market bears from these sales. Although less common, the company  12  may market and sell the shares  16  itself without marketing assistance from an investment bank  14  and thus retain the proceeds from the sale of the shares  16 .  
         [0007]     In any of the above-described cases, the basic transaction is the same, that is, a company  12  sells ownership in itself (i.e., its stock  16 ) to investors (i.e., investment banks  14  or the public  18 ) who believe that the company&#39;s stock  16  will appreciate in value over time. In this way, the company  12  keeps the money for the stock  16  it sells. However, these initial investors  14 ,  18  may sell the stock  16  to other investors  14 ,  18 . If the stock  16  has appreciated in value, sales by these initial investors at a higher price produce a profit. Likewise, if the stock  16  has depreciated in value, any sale would net a loss. This process continues throughout the life of the company  12 , with investors  14 ,  18  buying and selling shares  16  of the company  12  at a profit or loss.  
         [0008]     Outside the company buying back its own stock on the open market and reselling at a profit, a company only receives value and revenue from its stock through its original issuance and sale of the company stock to the original investors. Hence, such is a drawback with IPOs. Regardless of the amount of money initially raised by the issuer company, all subsequent trades as well as fees and gains thereon of the stock belongs to other parties. Accordingly, it would be beneficial if there was a trading royalty process or other vehicle that could provide revenue to a company by the subsequent sale of its stock post a public offering.  
       SUMMARY  
       [0009]     Accordingly, a method for facilitating a royalty on the sale of stock is disclosed. The method includes trading a share of a company stock between a seller and a buyer, and charging a fee for each share of company stock traded. The fee is accrued at the sale of the share of stock. The fee is paid by the seller of the share of the company stock. Each particular share of company stock includes indicia relating to the fee, wherein the indicia may include a legend or covenant indicating a payment of a royalty back to the issuing company. Generally, the fee is paid back to the issuing company of the share of stock or to a successor in interest thereof. The fee is collected and distributed via a stock exchange.  
         [0010]     Also disclosed is a method of trading securities including the sale of shares of stock onto a public market. The shares of stock include a legend or covenant indicating a royalty fee. The method provides for the collection of the royalty fee for each of the shares sold on the public market and paying the royalty fee to the issuer of the shares of stock. The royalty fee is paid by a seller of the share of stock. The royalty fee is paid back to an issuing company or successor in interest of the issuing company of the share of stock. The royalty fee is collected and distributed via a stock exchange.  
     
    
     BRIEF DESCRIPTIONS OF THE DRAWINGS  
       [0011]     The objects and features of the present disclosure, which are believed to be novel, are set forth with particularity in the appended claims. The present disclosure, both as to its organization and manner of operation, together with further objectives and advantages, may be best understood by reference to the following description, taken in connection with the accompanying drawings wherein:  
         [0012]      FIG. 1  is a flow chart detailing prior art proceeds from the sale of stock in a public offering and subsequent stock sales without the use of the trading royalty process in accordance with the principles of the present disclosure; and  
         [0013]      FIG. 2  is a flow chart detailing the proceeds from the sale of stock in a public offering and subsequent stock sales using the trading royalty process in accordance with the principles of the present disclosure. 
     
    
     DETAILED DESCRIPTION OF EXEMPLARY EMBODIMENTS  
       [0014]     The exemplary embodiments of the trading royalty process are disclosed and discussed in terms of capitalization of equity markets and stock trading. It is contemplated that the trading royalty process disclosed in the present disclosure may be employed in other stock or security offerings made by public and private companies. Regardless of the type of stock or equity class, the methods of the present disclosure can be employed to provide a trading royalty.  
         [0015]     As will be explained in greater detail below with reference to  FIG. 2 , the trading royalty process of the present disclosure is a vehicle designed to provide value to a party (for example, the company, an investment banker or other third party) by the subsequent sales of the stock or equity of the company.  
         [0016]     The stock of public companies is traded on various stock exchanges throughout the world. In the United States, for example, the New York Stock Exchange and the NASDAQ Exchange are the largest and most popular exchanges on which a company may be listed. These exchanges have their own qualifications for being listed as a stock as well as their own rules regarding trades. In addition, the Securities and Exchange Commission (“SEC”) regulates the operations of these stock exchanges. Although regulated by government agencies, stock exchanges are private organizations and are responsible for accurately accounting for and completing the stock trades of companies, which are listed on the exchanges as well as for the collection and payment of SEC fees. As a practical matter, the fees collected for the trading royalty process will be collected by the various stock exchanges through private agreement with those companies in a manner substantially similar to that used for the collection and payment of trading commissions and SEC fees.  
         [0017]     As shown in  FIG. 2 , and by way of a non-limiting example, the trading royalty process  20  of the present disclosure provides an interest or royalty  22  in the stock  16 , which is retained by the issuer or its assignees, such as, for example, investment bankers taking the issuer public. The interest or royalty  22  is noted in the prospectus and on the share or stock certificates. The trading royalty process  20  provides that the issuer retain, in perpetuity, a modest, stated royalty  22 , for example, $0.01, although more or less is contemplated herein, from each and every trade of each and every share of stock  16 . As discussed below, the trading royalty  22  is deducted by and accounted for by stock traders in the same way that sales and buy commissions and SEC fees are accounted. Since many investment bankers also have relationships with trading companies or affiliates, accounting of such royalties  22  would be easily adaptable. The issuer  12  of the stock  16  would have the right to audit clearing houses to ensure proper payment of the royalties  22 . The seller of the shares or stock  16 , which may include, for example, the investment banker  14  or the public  18 , shall pay the royalties  22  much like is now done with sales or commission fees on the sale stock  16 . This add-on royalty  22  much like the sales commission would not materially or adversely affect the share trading price of the stock  16 . Moreover, the trading royalty  22  will inhibit thinly capitalized, low priced companies from artificially inflating their volume by conducting trades between affiliates because the trading royalty is an add-on cost based on volume. If the trading royalty is equal to or a high percentage of the price of the stock, it will act as a cost disincentive to those who do not truly want to purchase the stock. The trading royalty is neutral to the market value if there is true demand for the stock and if the royalty is a small percentage of the stock&#39;s price.  
         [0018]     Referring to Table 1, and by way of non-limiting example, there is illustrated an average royalty  22  value to a sample company of non-operational income per day using the trading royalty process  20  of the present disclosure at a royalty rate, for example, of $0.01 per share per trade.  
                                 TABLE 1                           Sample Company Proceeds Using the Trading Royalty Process                Yahoo ®   Microsoft ®   Google ®                       $194,608   $655,927   $100,279                      
 
         [0019]     The trading royalty business process  20  cannot be applied to stock which has already been issued by a company because such stock was sold without any reservation of interest. However, the trading royalty business process  20  can be utilized by companies with existing stock if they issue a new class of stock (i.e., stock which is different from the shares which currently trade) or issue new shares in place of old shares. Typically, this re-issuance of shares is due to a stock split, company name change or some other change to the capital structure of the company. In order for a company to utilize the trading royalty business process  20 , while its stock is currently trading, it must reissue new stock to existing shareholders and broadly disclose that the new shares retain a trading royalty reservation of interest. This re-issuance can be made separately from or in conjunction with any other change to the stock, such as a corporate name change or stock split. Upon the re-issuance of the new stock, the new certificates which have the reservation of the trading royalty will be issued a new CUSIP number in order to distinguish the new shares from the old shares. In this way, the existence of the trading royalty reservation and their qualification for use in this business process  20  can be easily identified by the various stock exchanges and by the public.  
         [0020]     In an alternate embodiment, using the trading royalty process  20  of the present disclosure can provide companies with a trading royalty  22  even when there is a high volume of sellers in a stock which is traditionally harmful to the market capitalization of a company. While the share price in such an situation is reduced by market forces, the harmful effects of large selling volume on a company is somewhat ameliorated due to the non-operating income produced from the trading royalty generated by the high volume of sales.  
         [0021]     In yet an alternate embodiment, investment bankers  14 , eager for additional sources of income, may with the trading royalty process  20  of the present disclosure, for example, structure the IPO stock with a trading royalty  22  and require the issuer  12  to assign a percentage (e.g., 50%) of the royalty  22  back to the investment bankers  14 . In an alternate arrangement, for example, the investment bankers  14  may lower their underwriting fees in exchange for participation with the trading royalty  22 . In such an arrangement, every trade made by a stock trader, for example, would provide a royalty  22  to the company  12  and/or investment banker  14 .  
         [0022]     In operation, the trading royalty process  20  of the present disclosure could operate with and part of currently established rules and authorities. By way of non-limiting example, and pursuant to Section 31 of the Securities Exchange Act of 1934 (“Exchange Act”), incorporated herein by reference in its entirety, the SEC collects fees and assessments on securities transactions occurring on national securities exchanges and by or through members of national securities associations (collectively, “self-regulatory organizations” or “SROs”). The mechanism by which these fees are collected is governed by the rules and regulations of each exchange as well as Rule 31 promulgated under the Exchange Act. Because the automated systems are already in place to account for such fees on a per transaction basis and to assess miscellaneous fees on a per transaction basis, the collection and accounting of trading royalties  22  can be accomplished from each national securities exchange or national securities association in a manner similar to that used to collect Rule 31 fees.  
         [0023]     Paragraph (e) stipulates that the Rule 31 fees shall be paid: (1) on or before March 15, with respect to transactions and sales occurring during the period beginning on the preceding September 1 and ending at the close of the preceding December 31; and (2) on or before September 30, with respect to transactions and sales occurring during the period beginning on the preceding January 1 and ending at the close of the preceding August 31. By private agreement with each national securities exchange or national securities association, and in return for fees to such exchanges or associations, trading royalties  22  can be paid on the same dates using the existing software, mechanisms and procedures currently in place for payment of Rule 31 fees to the SEC. Stocks  16  which were subject to the trading royalty  22  could be marked on their symbol with an extension, for example, “.TR” (e.g., ABC.TR) or by CUSIP notation in order to permit automated trading programs to easily identify and capture the royalty  22  from the stock trade. The royalty  22  would then be paid to the company  12  or its assignee on the same schedule as set forth in Rule 31 of the Exchange Act.  
         [0024]     It will be understood that various modifications may be made to the embodiments disclosed herein. Therefore, the above description should not be construed as limiting, but merely as exemplification of the various embodiments. Those skilled in the art will envision other modifications within the scope and spirit of the claims appended hereto.