Bowie Bonds
David Bowie, was an influential artist in the music industry of the 20th century. His distinct visual style of presentation, coupled with amazing music and stagecraft had a significant impact on popular music. His alter ego, Ziggy Stardust, became a symbol of the LGBTQ+ movement at a time when mainstream society was not yet accepting of alternative lifestyles. Bowie pioneered the basic concept such as homosexuality. He experienced a revival in popularity in the 21st century with starring in a role as Nikolai Tesla in Christopher Nolan‘s film The Prestige, where he often overshadowed the other actors when he was on screen. His seminal song “Moonage Daydream” was also used in the movie Guardians of the Galaxy. To be terse, David Bowie was a musical genius and a fashion icon who helped to change the world for the better. He was a true pioneer and his legacy continues to inspire people today.
And in homage to throwback Thursday. I wanted to dissect and understand the concept of Bowie Bonds, also known as Pullman Bonds.
These were asset-backed securities of current and future revenues of the 25 albums (287 songs) that David Bowie recorded before 1990. They were pioneered in 1997 by renowned investment banker David Pullman. Issued in 1997, the bonds were bought for US$55 million by the Prudential Insurance Company of America, or about $100 million in today’s dollars. The bonds paid an interest rate of 7.9% and had an average life of ten years, a higher rate of return than a 10-year Treasury note (at the time, 6.37%). Royalties from the 25 albums generated the cash flow that secured the bonds’ interest payments.
Bowie Bonds were a unique type of asset-backed security because they were backed by intellectual property rights rather than physical assets. (Think like old school NFT’s). This made them a risky investment, but it also meant that they had the potential to generate high returns. Bowie Bonds were also a controversial investment. Some critics argued that they were unethical because they allowed Bowie to profit from his fans. Others argued that they were too risky because Bowie’s future earnings were uncertain.
From the mundane to the profound, Bowie Bonds were a success for investors. The bonds matured in 2007, and investors received all of their principal and interest payments.
Bowie Bonds were a groundbreaking financial instrument that paved the way for other asset-backed securities backed by intellectual property rights. They also showed that investors were willing to invest in risky assets if they had the potential to generate high returns.
– Gerardo Isaac Hamlin
