WO2008021282A2

WO2008021282A2 - Method for creating memorabilia stock

Info

Publication number: WO2008021282A2
Application number: PCT/US2007/017859
Authority: WO
Inventors: William G. Hearl
Original assignee: Hearl William G
Priority date: 2006-08-11
Filing date: 2007-08-09
Publication date: 2008-02-21
Also published as: WO2008021282A3

Abstract

A method is described for creating ultra-minority ownership in privately owned company for the purpose of creating memorabilia. In one embodiment, the company is a sports franchise. A restricted stock, designated as 'Fan Stock,' is created which represents a fractional ownership interest in the company. In one embodiment, the 'fan stock' is subsequently transferred to a third party distribution company, split and sold to the public as memorabilia representing a fractional interest in the company. The accompanying stock certificate bears certain identifying markings of the company and is the recognized piece of memorabilia.

Description

METHOD FOR CREATING MEMORABILIA STOCK

TECHNICAL FIELD

This invention relates to the fields of articles of memorabilia and to minority business ownership of companies, and more particularly the process for creating a class of stock that can be sold to the general public as memorabilia. In one embodiment, the memorabilia is sports memorabilia.

BACKGROUND ART Ownership of a sports franchise, in particular a major league sports franchise such as one in the National Football League, Major League Baseball or the National Basketball Association, is limited to a very select group of high-wealth individuals. Currently, there are approximately 100 major sports franchises in the United States. In a recent transaction for ownership, the Washington Nationals sold for $450 million to a small group of private investors. This clearly illustrates that substantial assets are required participate in the ownership of such a franchise. Furthermore, securities regulations require publicly traded franchises to disclose particular information and business details. Such requirements discourage private franchises from making themselves pubic franchises — despite the potentially large capital that could be raised should such public trading occur. Even though the value of stock certificates in sports franchises would be considered to be highly unique and valuable items of memorabilia, the regulatory and public disclosure requirements including the public disclosure of profitability and expenses that are required with a large number of shareholders is not generally considered to be in the best interests of the franchise and therefore make the addition of a large number of minority shareholders undesirable. Unlike many large, well known companies such as Coca-Cola®, Microsoft® and

McDonalds® that trade on one of the public stock markets, ownership of sports franchises is limited to private owner groups. Currently, there are no major sports franchises publicly traded and even in cases where the franchise is owned by a large corporation (e.g., the Chicago Cubs are owned by the Chicago Tribune) little information is available and direct ownership by the public is impossible. Limited ownership by the public has been infrequently available. For example, the Green Bay Packers and the Boston Celtics, now both privately held, were publicly traded in the past. Thus, ownership at even a trivial level is not an option generally available to the public. Rare stock certificates from teams previously publicly traded are occasionally available through memorabilia retail outlet. For example, a stock certificate from the Milwaukee Braves is available on e-Bay for a sale price of $500.

Sports fans spend millions of dollars each year on sports memorabilia including items such as jerseys, helmets, autographed balls, key chains and a wide variety of miscellaneous items. Autographs of owners and head coaches are relatively rare and constitute highly sought after items. To date, no one has provided a method whereby a sports fan may obtain an ownership interest in a privately held sports franchise.

Thus, there is a need for a novel mechanism to create an opportunity for minority ownership, even at a trivial level, that would enable sports franchises or other legal entities to derive value and revenue from the sale of a new type of sports memorabilia - fan-oriented stock certificates.

It is an object of this invention to provide such fan-oriented stock certificates.

DISCLOSURE OF THE INVENTION

In accordance with the present invention, there is provided a method of creating a memorabilia stock certificate that represents a minority ownership in a company. Restricted stock is created such that the total amount of restricted stock represents a minority interest in the company. The restricted stock may be transferred to a third party distribution firm or sold directly by the company; the restricted stock is then sold to the public and a corresponding stock certificate is issued. This stock certificate serves as the memorabilia article.

The technique described above is advantageous because it provides the owners of the majority interest in the company with an avenue to raise capital without risk of losing control over the company. The technique described is also advantageous because it provides the purchaser with a unique item of memorabilia.

BRIEF DESCRIPTION OF THE DRAWINGS

The invention will be described by reference to the following drawings, in which like numerals refer to like elements, and in which:

Figure 1 is a flow diagram of one process of the invention; Figure 2 is another flow diagram of another process of the invention; and

Figure 3 is a sample memorabilia stock certificate.

The present invention will be described in connection with a preferred embodiment, however, it will be understood that there is no intent to limit the invention to the embodiment described. On the contrary, the intent is to cover all alternatives, modifications, and equivalents as may be included within the spirit and scope of the invention as defined by the appended claims.

BEST MODE FOR CARRYING OUT THE INVENTION

For a general understanding of the present invention, reference is made to the drawings. In the drawings, like reference numerals have been used throughout to designate identical elements.

The invention described herein provides a method to create a new restricted class of stock which can be sold to the public. The restricted shares are not sold for their investment value in the parent company but rather as a collectable item of memorabilia. The restricted stock may be sold either directly by a company or through a third-party distribution entity. Thus the restricted stock represents fractional ownership of the company while creating a unique piece of memorabilia that has a value other than the mere the market value of the stock itself. Any suitable company may be used in conjunction with the method disclosed in this specification.

As used in this specification, the term "company" refers to any of the legal entities that do business as a commercial or industrial enterprise. Reference may be had to Black's Law Dictionary, seventh edition, Bryan A. Garner Editor, 1999, West Group, which defines a company to include "...a corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official or liquidating agent. Other examples include limited-liability companies, class C corporations, class S corporations, and franchises. As used in this specification, and as defined in the aforementioned Black's Law Dictionary, as franchise is an organization that has the "...sole right granted by the owner of a trademark or tradename to engage in business or to sell a good or service in a certain area."

In one embodiment the company is a member of the National Football League, a baseball team, a basketball team, a hockey team, an automotive racing team, a race horse or other sports/business entity. Other suitable organizations that oversee such companies include the National Football League, Major League Baseball, minor league baseball, the National Basketball Association, the National Hockey League, NASCAR (National Association for Stock Car Racing), PGA (Professional Golfers Association), CART (Championship Auto Racing Teams), and the Indy Racing League. Non-sports entities, such as popular singers and/or actors, and tournaments and events (e.g. The Masters golf tournament and The Indianapolis 500) are also considered within the scope of this invention.

Referring again to Figure 1, and the example illustrated therein, in step 102 of process 100, the company determines the total number of common shares (n) available in the company. If no suitable common shares exist, then such common shares are created. As used in this specification, the term "common stock" refers to the treasury shares of stock owned by the company that may be sold with or without restriction as determined by the board of directors of the company.

Thereafter, in step 104, the company reserves a finite number (n) of common shares for use as restricted stock. The finite number (n) of common shares is selected so that the interest held by the majority owners is not substantially altered.

In step 106 of process 100, for every X shares of common stock, one restricted stock share is created. In one embodiment, X is at least about 10,000. In another embodiment, X is at least about 100,000. In another embodiment, X is at least about 1,000,000. In yet another embodiment, X is at least about 10,000,000. In one embodiment of the invention, the restricted stock represents less than one one-millionth of the total sports franchise ownership. For example, for every one million common shares in existence, one such common share is used as a restricted share. In one embodiment, less than 50 percent of the common stock is reserved for use as restricted stock. In another embodiment, less than 10 percent of the common stock is used as restricted stock. In yet another embodiment, less than 1 percent of the common stock is used as restricted stock. As used in this specification, the term "restricted stock" refers to stock that is subject to certain restrictions regarding its sale. As described in United States published patent application US2003/0154149A1 to Gajendragadkar (System and Method of Creating and Executing a Restricted Stock Sale Plan) "...there are also classes of restricted stocks held by certain classes of individuals or institution ("holders) in companies that are subject to certain restrictions regarding the sale of such stocks." The content of US2003/0154149A1 is hereby incorporated by reference into this specification. The restricted stock disclosed herein possesses unique characteristics that provide such stock with value as an article of memorabilia. The restricted stock of the present invention possesses at least one of the following properties: (1) non-transferable except between an individual who purchased the stock, the company, and a third-party distribution entity designated by the company (i.e. one individual cannot sell the restricted stock to a second individual); (2) non-voting stock; (3) non-dividend bearing; (4) absent of any rights to financial information, corporate information or participation in the decision making process of the company; and (5) the owner of a restricted stock does not receive ownership in the intellectual property of the parent company (e.g. ownership in trademarks, the freedom to use and license those trademarks, and the like), (6) the owner of a restricted stock does not have any rights to attend shareholder meetings, Board of Directors meetings, or other business meetings nor does the owner have any rights to contact any company employees including players under contract, coaches and any other staff of the company, and (7) a significant portion (at least 50 percent) of the purchase price represents the memorabilia component and is represented by the stock certificate. In one embodiment, the restricted share are private placements offered under Regulation D Rule 504 or 506 and are not publicly traded. Purchasers of a restricted stock understand that they are buying a divided interest in a share of stock. There is no expectation that the restricted stock will ever be part of an initial public offering (IPO) and there will be no future re-sale market for the restricted stock. Due to these and other restrictions, it is unlikely that the restricted stock will ever increase in value beyond the purchase price which is perceived to be well above book value of the company.

It is important to note that common stocks, such as those publicly traded on the open markets, derive their primary value from the value of the underlying company. Such value is enhanced by the transferability of the common stock from one individual to another by the highly competitive bidding process seem in a free market economy. As the underlying company grows, becomes more profitable, or makes new advances, the common stock increases in value or is perceived to increase in value. As a result, the buyers are willing to pay more to own the common stock. The freely tradable nature of a common stock significantly adds to its market value because many individuals are bidding the price up (or down).

In contrast, the restricted stock disclosed herein derives its primary value as an item of memorabilia - i.e. the visual appearance of the stock certificate itself and the bravado associated with ownership of the underlying sports franchise or company. Unlike common stock, the restricted stock does not increase in value because a "potential buyer" would be willing to pay more for the stock - such a "potential buyer" is unable to purchase the restricted stock from another individual. The "potential buyer" can only purchase the stock directly from the company or from a third-party distribution entity.

Referring again to Figure 1, once the restricted stock has been created, the restricted stock is sold in step 108. In one embodiment the company performs step 108 and sells the restricted stock directly to the company. In another embodiment, the restricted shares are transferred to a third-party distributing entity prior to step 108, and it is this distributing entity that performs step 108. Such an embodiment is illustrated in Figure 2. Examples of suitable third-party distributing entities include brokerage firms and the like. In one embodiment, step 108 is performed over a network. In one such embodiment, the network is the internet. In step 110 of process 100, the buyer of the restricted stock is provided with a stock certificate that functions as a memorabilia of the company. The stock certificate serves as memorabilia due to markings on the certificate that are indicative of the company. For example, such markings include a trademark or logo owned by the company. The trademark may be a registered or unregistered trademark. An example of one such certificate is shown in Figure 2. The certificate shown in Figure

2 bears the signature of the company owner, the signature of the president and the official seal of the company including its logo and other decorative features. Other certificates, not shown, may include the signatures of other individuals publicly associated with the franchise, such as head coaches or popular players. Similar personalization of sports memorabilia is known in the art. Reference may be had to United States patent 6,920,709 to LaMalfa (Sports Memorabilia Articles Having Collectable Attractiveness Attributes), the content of which is hereby incorporated by reference into this specification.

In one embodiment of the invention the purchased stock certificate is mounted in a suitable frame, decorative matte or other display apparatus. Suitable display apparatuses are known in the art. Reference may be had to United States patents 4,995,508 to Burley (Display Case for Sportscards); D352,176 to McMillan (Sports Memorabilia Holder); 5,082,110 to Hager (Protective Case for Collectible Baseballs); 5,277,949 to Green (Frame with Class on Both Sides for Athletic Miniatures and Sports Memorabilia); 6,562,423 to Rubin (Sports Memorabilia Article and Display Method); 5,339,547 to Fogel (Display Device) and the like. The content of each of the aforementioned patents is hereby incorporated by reference into this specification. In some embodiments a novelty article also provided to the purchaser of the restricted stock along with the stock certificate. For example, when the company is a baseball team, the seller may provide the stock certificate along with a baseball. In one embodiment, the baseball is autographed by a representative of the company. In another embodiment, the stock certificate includes authenticating indicator that makes production of counterfeit stock certificates more difficult. In one embodiment, the authenticating indicator includes the signature of an officer of the company or sports franchise. Many other suitable counterfeit measures are well known in the art. Reference may be had to United States patents 5,306,049 to Schireck (Sports Memorabilia Authentication Kit); 6,839,453 to McWilliams et al. (Method and Apparatus for Authenticating Unique Items such as Sports Memorabilia); and the like. The content of each of the aforementioned patents is hereby incorporated by reference into this specification. In the embodiment depicted in Figure 2, the company transfers the restricted stock to a third-party distributing entity in step 202. The third-party distributing entity does not purchase the restricted stock (i.e. the entity does not become the owner). The entity is merely receiving the restricted stock for sale to the public. In one embodiment, the restricted stock is split prior to sale. hi the embodiment depicted in Figure 2, the restricted stock is split prior to sale to the public in step 204 (which is optional). Step 204 may be performed by the distribution entity (as shown in Figure 2) or by the company itself (not shown). Such a splitting step may be performed prior to step 202 (transfer of restricted stock) or subsequent to step 202 (as shown in Figure 2). The restricted stock is split in a ratio of 1 :Y, where Y is a number greater than about 1,000. In one embodiment of the invention, the restricted stock is split 1 for 10,000. For example, if each restricted stock share represents one one-millionth of the total sports franchise ownership, and the restricted stock is split 1:10,000 then a net dilutive effect of one ten-billionth of a share of the company is produced.

It is therefore, apparent that there has been provided, in accordance with the present invention, a method and apparatus for creating a memorabilia stock certificate. While this invention has been described in conjunction with preferred embodiments thereof, it is evident that many alternatives, modifications, and variations will be apparent to those skilled in the art. Accordingly, it is intended to embrace all such alternatives, modifications and variations that fall within the spirit and broad scope of the appended claims.

Claims

I claim:

1. A method of creating a memorabilia stock certificate that represents a minority ownership in a company comprising the steps of: a. creating a restricted stock from common stock, wherein said restricted stock represents a fractional ownership in a company such that less than 50 percent of the ownership interest in said company is in said restricted stock; b. selling said restricted stock to a public purchaser; c. delivering a stock certificate to the purchaser that has markings indicative of said company.

2. The method as recited in claim 1, further comprising the step of transferring said restricted stock to a third-party distribution entity, wherein said third-party distribution entity performs said step of selling said restricted stock.

3. The method as recited in claim 1, further comprising the step of splitting said restricted stock prior to said step of selling said restricted stock to a public purchaser.

4. The method as recited in claim 2, further comprising the step of splitting said restricted stock prior to said step of selling said restricted stock, wherein said third-party distribution entity performs said step of splitting said restricted stock.

5. The method as recited in claim 1, wherein said common stock is privately held common stock.

6. The method as recited in claim 5, wherein said company is a sports franchise.

7. The method as recited in claim 1, wherein said markings comprise a trademark owned by said company.

8. A method of creating a memorabilia stock certificate that represents a minority ownership in a company comprising the steps of: a. creating a restricted stock from privately held common stock, wherein said restricted stock represents a fractional ownership in a sports company such that less than 10 percent of the ownership interest in said sports company is in said restricted stock, wherein said restricted stock is transferable only between a public purchaser and said company; b. selling said restricted stock to said purchaser; and c. delivering a stock certificate to said purchaser that has markings indicative of said company.

9. The method as recited in claim 8, wherein said restricted stock is non-voting stock.

10. The method as recited in claim 9, wherein said restricted stock is non-dividend bearing stock.

11. A method of creating a memorabilia stock certificate that represents a minority ownership in a company comprising the steps of: a. creating a restricted stock from privately held common stock, wherein said restricted stock represents a fractional ownership in a sports company such that less than 1 percent of the ownership interest in said sports company is in said restricted stock, wherein said restricted stock is transferable only between said company and a third-party distribution entity; b. transferring said restricted stock to a third-party distribution entity, thus produced transferred restricted stock; c. selling said restricted stock to a purchaser; wherein said third party distribution entity performs said step of selling said restricted stock, and wherein said transferred restricted stock is transferable only between said third-party distribution entity and said purchaser; and d. delivering a stock certificate to said purchaser that has markings indicative of said company.