‘If you want to make money in a casino, own one.’ –Steve Wynn
In 1997, David Bowie issued “bonds” that enabled their holders to earn a percentage of royalties from his back-catalog for the next ten years. An owner of a $1000 “Bowie Bond” would receive a 7.9% coupon each year. Prudential Insurance bought the first batch for $55 million.
At the outset, these securities seemed like a safe investment. Bowie’s songs were played regularly on the radio, and his albums were selling well, even decades after they were published.
Royalties from his work generated a steady income stream that was likely to continue. Bowie Bonds received a triple-A rating from Moodys, indicating they were as safe as U.S. government bonds.
But as online music sharing grew in popularity, Bowie’s album sales declined, and the bonds started to trade at a discount.
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