Listerine Mouthwash Royalties | Hacker News Reader

Listerine Mouthwash Royalties

auctions.royaltyexchange.com

235 pointshodder193 comments

Looking at most of the auctions, this looks like: "these are the deals that don't make the hurdle rate of the typical buyers, so let's make some money selling them to the dentists who like the idea of owning a song and won't look too hard at the return."

I'd love to be wrong, but I'm not seeing a good alternate explanation.

I think this is great and not often looked way to diversity. They are selling at 20X annual earnings (or 5% annual returns) and have track record of producing earnings for over 100 years. Additionally, royalty is brand dependent (it seems), not whether Listerine actually uses formula. Also, this is regular consumable that is unlikely to get displaced anytime soon. The best thing about it is that it is inflation protected. Not a bad deal to diversity in low-risk, low-return zone.

I can get a 4.5% cap rate on real estate in a hot market like Los Angeles. I can get a 50% loan on the property as well. The property will likely appreciate on the backend and when it's time to sell I can 1031 exchange in to another property or do an opportunity zone to defer taxes. I can get a conventional loan from a bank against that property if I ever need to pull dollars out.

A 5% return royalty is largely illiquid, can not likely be collateralized at a low interest rate, has limited ability to appreciate in value, etc. etc.

I don't see it as that valuable...especially with the decline of major CPG brands. The remaining risk with this investment is completely unknown to me.

idk about the remaining risk, but there's definitely a kind of conservative investor who would be happy for a 6.5% return from a forever holding; also there's no reason to think you couldn't auction it for higher later. (Say, a decade from now when interest rates start falling again). It's a bad time to buy this thing, maybe... if you think you'll fetch higher returns next year. I'm a fan of tobacco, (don't shoot me, I'm a chain smoker, it's my future health plan), but it's just another thing people buy without thinking about what it costs. A lot of people are looking for stability versus maximizing growth. This always gets a bad rap - people think I'm insane for keeping almost all my portfolio in utilities and basic necessary goods. I'm 10% in tech and 10% in retail... the rest is utilities, commodities, real estate, and whatever kicks out at least 4% annual dividends. I'm in my early 40s, and have followed this strategy since my 20s. Could I be richer if I were more aggressive... probably. Although giving my track record in Vegas, maybe not. But I don't try to time the market, I basically never sell anything. I drip dividends and accumulate. I never got struck it rich on a hot ticket but I worked $100k saved in my 20s up to $1m or so now, rotating and seeking dividends.

What I'm trying to say is that for some people, the marginal cost of risk - even from real estate - is worth a few points on a "sure thing". A sure thing is hard to find.

Considering the volatility in the housing market, and the growing populous demand for affordable housing I think you’re valuing real estate extravagantly.

The worst thing about earning money is the stage where no you longer spend based on reason, but instead based on capital potential. The housing bubble has been building and building and building flames fumed by apparent risk-free-Xing your net worth.

Its a house of cards. When you have 20 properties, you are 20x'ing your risk of getting the lemon. My uncle started down this path 30 years ago and eventually got royally screwed. Its a chain, this choice of investment chains you to a wage.

Genuine question, what happened to your uncle? Was he screwed in the 2007/8 crash? A close family member of mine was nearly bankrupted when the banks tightened lending policy.

I'm not referring to housing--although I think it's anyone's guess what happens to housing. Bonds are currently dead as an asset class and people see RE as an inflation hedge. I do see an upper limit to what individuals can afford and we're beyond that.

The only two groups I'm interested in as tenants are low income housing and corporate tenants. That's why I'm in industrial real estate.

Either way, this royalty agreement by comparison does not look like a good investment. The illiquidity of it means I need much higher returns IMO.

>> and the growing populous demand for affordable housing

Not unless you expect a communist revolution in the next ten years

No one ever expects the Spanish Inquisition.

Maybe not a full-blown communist revolution but I expect the rules surrounding residential investment properties to change. Whether that's rent control, eviction moratoriums, increased taxes, or whatever other concessions populists will make. There's considerable regulatory risk going forward.

If I’m understanding correctly it’s a “flat rate royalty”, ie: not 5% or 0.5% or whatever but rather is specified in a fixed “$ per units sold”.

It doesn’t seem like it rises with inflation, so it’s value in real terms will decline over time if Listerine’s sales volume remains constant.

This will be particularly noticeable during periods of high inflation, which is probably why it’s on the market right now!

For a $1M property, a 4.5% cap rate would be $45,000 in net operating income (after all expenses).

At least for residential property, you'd be lucky to get $45,000 in gross income on a $1M property in Los Angelas.

Are you talking commercial property?

Yes, I'm talking commercial.

Isn't the current admin trying to stop 1031 exchanges?

This sounds like it involves a lot of labor and transaction fees, and perhaps some liability. What would be the returns if I paid someone to do all that?

I do commercial (specifically industrial) so there's not that much labor. With NNN leases you shift most of the burden to the tenant. The big issue is, of course, the creditworthiness of the tenant.

I thought the medical consensus these days is aligning on mouthwash being actively harmful? Kills good bacteria in your mouth, increases risk of oral cancer, etc.

if you're worried, you just need to buy a non-alcohol non-chlorhexidine based one. Listerine offers it too.

https://www.listerine.com/mouthwash/listerine-zero

You're thinking of mouthwash with ethanol alcohol.

Listerine is 21% to 26% ethanol.

https://en.wikipedia.org/wiki/Listerine

Personally, too weak for me; I gargle with moonshine.

This may be medical disinfo. Listerine was long considered a great remedy and preventative care against flus and colds for a long time. This was lobbied against, they were sued and the ftc made them stop advertising as such.

Why would a mouthwash be effective against a virus in your nose?

Using alcoholic mouthwash is bad for the same reason taking antibiotics is - and you may actually want to take oral probiotics for the same reason the ones you eat are healthy. Though I don't know the current state of evidence for them.

"Disinfo" by who, exactly?

Mouthwash is a very American phenomenon though, AFAIK it's not used as commonly anywhere else in the world. Which suggests at least part of its American popularity is due to marketing.

I'm not in America and I use it twice a day, non alcoholic one though. Dentists have all told me it's good to use. is it not!?

My dentist has told me it's useless.

The royalty is actually a fixed dollar amount per X weight of product sold - so not inflation protected.

Since this has been a thing since the 1800s, wouldn't it be paying out pennies per ton at this point? There has been a lot of inflation in the last 150 years.

Is it? The finalized says ten per cent of gross apparently.

Surely they sell more that $1.14m worldwide per year

True, though this is an unspecified fraction of the royalties.

I’m looking at this and thinking about how to model the cost of having creating a massive increase in the number of plays of one of these songs and the resulting Roi

Make it viral on TikTok

it's a market. of course the unsold inventory is stuff people didn't want to buy.

Are you getting royalties for use of the Listerine brandname or something in the formula?

If they changed the formula to something totally new but kept the Listerine branding are you getting paid? If they kept the formula but gave it a new name would you get paid? Just a new spelling?

Also how much has this royalty been subdivided?

The numbers and concept seem interesting but the site seems to lack a lot of details.

The original contract was something like a two sentence contract. Presumably the royalty stream has been subdivided a lot. And it's the best selling mouthwash in the US. AFAIK, all the mouthwashes under the brand, including alcohol-free ones, are still covered by the original contract and there have been significant reformulations.

All the answers are in the lawsuit:

https://law.justia.com/cases/federal/district-courts/FSupp/1...

How does one value perpetual earning investments? The $2.1M is 18.36 times the annual earnings. So after 18 years you’ve paid off your investment and get $100+/year forever. In 36 years you’ve doubled your money and the return would be 2% using the back of napkin rate divided into 70 doubling time.

But over time it just keeps paying off, so the stability is good but likely many other investments would give higher returns.

The short answer is Net Present Value or Discounted Cash Flow. Future money is worth less than present money for inflation and other reasons. So you discount any future moneys by some amount per year--doesn't need to be a fixed amount--and eventually you reach a point where that dollar you're receiving in 50 years is worth... not much.

Very theoretically stocks are valued in the same way based on future dividend payments. But that's not really how analysts price companies.

But if this is royalties from sales, wouldn't the amount theoretically rise with inflation, especially for a mass market consumer product like Listerine? So I don't see how if you hold on to this royalty (easy to do), and Listerine sales don't tank (out of your control), wouldn't your earnings be more or less constant in real terms?

I was answering a specific question--how you evaluate. Yes, in this case, I would assume royalties would track roughly with inflation, i.e. future cash flows will increase although there are other reasons to discount beyond that number. Even absent inflation you can earn some money by banking it. And there's also risk of "stuff" happening as you move into the future.

DCF still works if you assume 0% inflation, as even without inflation tomorrow dollars are worth less than today dollars.

> even without inflation tomorrow dollars are worth less than today dollars.

Interesting and a little counterintuitive but I guess it has to do with the time value of the dollar. As in you own the dollar longer thus it has more value?

> As in you own the dollar longer thus it has more value?

No. As in, having $10 million cash in hand today has more value than having a guarantee that you will be paid $10 million 10 years from now. Think about it, would you rather have $10 million now, or in 10 years? Which is more valuable to you?

Exactly this. I’ll gladly pay you Tuesday for a hamburger today.

Two ways to think about why I'd rather have $1,000 today than $1,000 a year from now:

- I could invest the money today and have more than $1,000 next year

- I might die before next year and never get to enjoy the money

Essentially I’ll never lend you money if i won’t earn anything from it.

https://en.wikipedia.org/wiki/Annuity#Valuation

Assuming 0 growth the formula for calculating the present value of a perpetuity is: annual cashflow / discount rate = present value

So based on your numbers, the discount rate is 5.6%. For personal investments, the discount rate is often used is the rate of return that could be obtained from other investments. If we look at stocks (s&p500) around 7% post-inflation return historically, using that as the discount rate, the present value is $114,253 / 7% = $1.6m. That is to say 2.1M is better off in the stock market than buying this, if you assume 7% returns on average.

EDIT: Actually if you assume this tracks inflation (not sure if this is true) and payout grows 2% per year, the discount rate is closer to 7.5%. The formula including growth: http://news.morningstar.com/classroom2/course.asp?docId=1451...

It's especially great if you live forever, as in 55 years you'll triple it and in 73 you'll quadruple it!

I don't see how it compounds. It's just a royalty stream?

It must keep pace with inflation though (I guess through increasing sale price of Listerine over time?)

There's no compounding in my reply, each 18 years you make the same amount.

DCF

This also peaked by interest, as well as the general concept or royalty investing. But so far, I haven't found anything that seems worth it. First, none of the royalty are guaranteed, so you could buy something that may or may not get the same returns year in and year out. Some of the royalties are small slices of certain songs, like a small writer credit - so you are not clear on exactly what is being bought with out more research. As an example there have been songs like jcole + kanye west workout / workout plan. There were a bunch of songs, three may be considered well known, but you are getting a small slice from one writer in that case. So you really need to dive into what is being bought. Best case I can see on the songs is that maybe one day some movie or tv show uses the music and you get a nice bump in earnings, or there is some popular cover in the future. 100k a year royalties, not guaranteed might make sense at a million which gets you a 10% return which is decent, but this trades more like a bond. Your resale may not be great if interest wanes in this royalty exchange and you can get more stable returns in the bond market in vanguard (trading actual bonds not etf's). I like to invest in what I understand and what is simple, this just so far is not. I do use Listerine zero (less intense / alcohol free) which I'm not sure counds in this stream. I haven't bought the original in a long time, since it has no flouride.

"This has also piqued my interest..."

"Peaked my interest": caused my interest to increase to a high point before declining.

"Piqued my interest": aroused or provoked my interest.

I hate to use reddit as a resource, but there's a good discussion here about why "peaked my interest" doesn't make grammatical sense. "Peaked" is not a transitive verb. "Peaked my interest" is a bastardization of the original because people were not familiar with the word "piqued" and guessed at how it was spelled when they heard it.

https://www.reddit.com/r/grammar/comments/1n7ezp/why_is_piqu...

I agree that "peaked" is intransitive! I was trying to parse it naively, to expose the silliness (i.e. for a laugh). Should have chucked in a smiley.

I missed your subtlety because it's still quite early where I live.

Interesting angle there for a form of 'insider trading' - people in tv/film industry could easily buy this up and slide their assets into their own creations.

What I don't quite get is why the royalty payers don't start buying as well, feels like an easy way of boosting profits (assuming they can finance at a lower rate)

For the songs I assume because they produce fewer and fewer royalties over time, and the only ones for sale are those that aren’t worth that much.

But it would be amusing to get that Shrek set heh.

This is a very interesting asset on an interesting site I just found at an attractive FCF yield assuming current bid gets hit. Does anyone have experience in investing in, or securitizing a royalty stream? Quite fascinating.

Not sure if a P/E of 18.38 is so so attractive, it looks neither cheap nor expensive for something that will at best keep up with the (nominal) GDP growth.

Why is it so cheap though in terms of absolute value, is the percentage of revenues claimed by this asset very low? The offer lacks detail. Where's an appropriate SEC form when you need one :)

> Why is it so cheap though in terms of absolute value, is the percentage of revenues claimed by this asset very low?

It's not a percentage but a fixed dollar amount; the court case from the 50s says the agreement is to pay "six dollars on each & every gross of Listerine & Lithiated Hydrangea manufactured or sold". There was also an agreement for something called "Dugongol & Menthated Camphor", which was 10%, but that hasn't existed in a long time it seems (can't find anything in a quick search).

I assume that with a "gross of Listerine" they mean 144 bottles, but this bid isn't the complete contract since they sold other parts before; this 30k/year one sold for $561k in 2020.[1]

I'm not an expert on these things at all, but overall seems like a bit of a so-so investment because inflation.

[1]: https://auctions.royaltyexchange.com/auctions/sales-royaltie...

>> Not sure if a P/E of 18.38 is so so attractive, it looks neither cheap nor expensive for something that will at best keep up with the (nominal) GDP growth

P/E is just an indicator (E/P) of what dividends could be. In this case the return is real and is over 5 percent. But it's not quite the same. As others have pointed out there is no physical asset behind the investment. OTOH it appears there is also no way to "cut the dividend" ever, so it's as solid as the brand.

It’s an auction, so it’ll go up, but there have been auctions before, so it seems like different heirs/successors are selling their stakes sliver by sliver.

My fear is that this is a branded product and as the royalty stream gets further and further away from the manufacturer/marketer, they’ll just kill off the product and push royalty-free alternatives.

To put the wisdom of buying the royalty stream aside for a moment, why would a manufacturer abandon an iconic and profitable brand like Listerine after more than a century just to avoid paying royalties they've been paying during that entire time?

It's not very tradable on the open market, so you really are buying a revenue stream.

However, pensions and endowments are probably quite interested.

I stated it was attractive if the bid gets hit, which as posted was 1.5m. Listerine revenue royalties likely keep pace with inflation while facing no bottom line risk. A 6-7.6% to yield is certainly attractive in my opinion for this asset.

I'm surprised that Johnson and Johnson wouldn't want to immediately snap up any available royalties that they could. Getting rid of perpetual royalties seems like an absolute no brainer to me if I were the CEO of JnJ.

If it's for sale to the public it most likely means it's overpriced. Everyone who owns a share of it knows more about it than you, and the manufacturer itself has almost complete information. If they aren't buying it at this price, it's probably not worth it.

Royalties are equivalent to the lump sum cash paid for it. You should be indifferent to holding the cash vs. holding the rights to royalties.

I could be wrong about this, but you, as a third party should be indifferent to holding it vs cash. J&J shouldn't - if they owned this it would change the cost structure of selling the product. Let's say they buy it, they're now paying $x less in cost per unit, which from a static perspective is the same as the cash value of the royalty, but it could allow them to drive more money into advertising, which would yield more sales of the product. Previously this would've increased the value of the royalty (which they don't own) but now they capture that value instead.

There is also an administrative cost to auditing and paying these royalties.

Right, it's not insignificant. Buying up all the available royalties would reduce this factor to zero for JnJ.

There might be so many individual holders that buying up all the royalties would be infeasible and they are not even going to try. I can imagine with inheritances from 1881 the royalty stream might be owned by 100+ different entities by now.

Cash is king, royalties may dry up tomorrow.

It a 5.5% cap with nothing backing it. Il take any random real estate deal (which has tons of tax benefits) over this any day of the week, plenty of which exist at the same cap or higher and come with actual assets (land, building, etc..)

Dont get me wrong, Listerine is definitely as strong a brand as there is (I cant even name a competitor off the top of my head) so im not that worried about this going to zero, but that said I would still expect a cap of ~8-10% to have this make sense over other options backed by assets.

That's a silly comparison. Investors would be comparing this to some pretty low yield bonds they would buy to mitigate the risks of being over invested in real estate and stocks. Even in a recession after a lot of bubbles burst, consumer brands of household items tend to sell pretty well.

Right. At some point you can't just buy more VTI, houses, or whatever. It's almost like the term "hedge fund" means something.

The brand may not be a hard asset but I’d say it’s likely to hold its value better than plenty of hard assets (is an office building in San Francisco really less risky than Listerine?) and than lots of other royalty-generating intangibles at similar cap rates (will there still be any Neil Diamond fans alive in 20 years?)

> (will there still be any Neil Diamond fans alive in 20 years?)

Will people in the UK ever stop singing songs at football matches?

>> It a 5.5% cap with nothing backing it.

This is not true. Listerine has one of the most famous contract law cases in the world backing the royalties for life, tested in court.

It is almost assuredly the most secure contract of this type you can possibly acquire.

I wouldn’t mind if it wasn’t priced so high (what isn’t these days).

Assets have downsides too. Insurance, taxes, maintenance, and general overhead in the sense that they are significantly less passive. I don’t get the “nothing backing it” part, maybe it’s not tangible but the brand here does have massive value and all but guarantees substantial gross sales year after year.

> I wouldn’t mind if it wasn’t priced so high (what isn’t these days).

It's funny, to me it seems extremely cheap. With $2M, you can basically guarantee 100k/yr in perpetuity while being hedged against MMT interest-rate-fiddling, money-printing-induced inflation, a crypto crash, a stock market crash, a housing bubble crash, a tech bubble pop, etc.

This was my thinking. Top line risk on a staple consumer asset that’s been around over a hundred years, and can scale rev with inflation. No margin risk. Seems very cheap. Can prob borrow modestly under the yield and write off the interest on a leveraged version of the asset.

> I cant even name a competitor off the top of my head

Store brands are the competitor. They are exactly the same, but cost less.

Also Crest Pro-Health, ACT, and TheraBreath of the top of my head. I imagine Colgate also has a mouthwash.

This is what used to be called "passive income."

Meanwhile, I believe mouthwash is a scam and actually makes your mouth drier and more prone to halitosis if used over time?

This is because of negative impacts that broad antimicrobials have on your oral microbiome. These mouthwashes essentially burn away your microbiome and allow for new species to repopulate the niche. Many times this means that anaerobic species that cause halitosis can come fill in the space.

A few comments with informational stuff from your company is fine, but you're taking it too far with the repeated replies.

Would you mind Not trying to control people. It is one thing if it were spam and essentially the same message. It is another thing to be the way too are being, concerning themselves with how often someone wants to provide input on a topic.

You really may want to re-examine yourself, because that’s comment alone emanates a deep psychological issue with control. I very much appreciated the reply and input into why the states may be a factor. It is not your place to try to prevent me from hearing/reading what others want to tell me. It is a rather vile and reprehensible personality flaw.

If I need an online therapist who makes grammatical errors, I'll look you up. Otherwise, your suggestion has been lightly read and ignored.

But the same applies to your comment.

Related to Listerine: I have a memory of reading a study that had people use mouthwash (possibly Listerine) the night before taking a cognitive test. The mouthwash group did worse than the control group for some reason.

I'd really love to find the study again if anyone else knows where it is (my googling is apparently not good enough)

> The mouthwash group did worse than the control group for some reason.

I give it higher odds that the study's results were based on bad statistics, or an insufficient sample size, than that there's an actual notable difference here.

The reproducibility crisis has made this, I think, a reasonable default assumption for old studies of this sort.

I wonder if it's the Sucralose, a chemical completely unrelated to sucrose(table sugar) and was originally developed as a pesticide. I used Listerine for many years before I developed a severe allergy to Sucralose. It started with the skin inside my mouth peeling slightly, it wasn't painful at all just kind of weird. Eventually I began getting hives and rashes on my hands and arms and slowly it kept getting worse and worse. If I use mouthwash or use toothpaste with Sucralose today I'll have very bad hives all-over hives that'll persist for a couple days. Ingesting any via food/snacks means a week of hives and needs a round of predisone to feel somewhat normal until it's all gone from my system.

> Sucralose, a chemical completely unrelated to sucrose

Seeing as how it is made directly from the sucrose, I'm not sure how you can say it is "completely unrelated". It is identical to sucrose except for the substitution of three chlorine atoms for hydroxyl groups.

Have you seen an allergist about your reaction? They should be able to do a skin test to confirm the allergy, and I'm sure they would be quite interested, as there seem to be no reports in the medical literature of sucralose allergies.

One morning, as Gregor Samsa experienced the pesticidal effects of a sweetener used in his mouthwash, he discovered that he had been changed into a monstrous verminous bug.

I had to look up that reference to Gregor Samsa, lol. Btw, I ordered the complete Far side in hardcover immaculate condition that came in 2 giant books for around $50 a few years ago from someone on ebay. For any Gary Larson fans it's a great library addition though it's more like $75-100 these days, and I imagine they'll only get more expensive.

Dunno, but most contain alcohol which could have a negative effect, even after the ethanol itself is cleared.

Many are re-formulating to alcohol-free formulas, and I think it’s because they fear tobacco-style lawsuits from anyone that gets oral/throat cancers.

Many stores also won't carry it due to shoplifting concerns. I've seen many drug stores with signs posted on the door that they carry only alcohol free Listerine.

Well that is quite interesting. I have never seen a store or sign like that. I thought the ethanol has been denatured with various agents to make it unpleasant to consume for that very reason. I guess the consumer has degenerated so much that he is willing to suffer the consequences of its consumption?

It strikes me that this cannot really be a good sign for society in general when the degeneration is breaking through even the measures to inhibit degenerative detrimental behaviors. It also appears we are accumulating such conditions at an alarming rate all across the western world in particular, emanating and spreading out from a few specific points.

I work in a hospital in a large city (>1 million). I review admitting diagnoses on a regular basis, it's very common to see 'listerine ingestion' or 'hand sanitizer ingestion'. We have policies about where we place hand sanitizer in the hospital and evaluating patients that are at risk of ingestion. Unfortunately we have had many adverse events related to patients drinking it while admitted to hospital. An unfortunate part of our society is that some people are in the position where they drink these products.

Might be related, but mouthwash use is correlated with a drop in systemic nitric oxide levels due to the negative impact on the oral microbiome. You can find a review here:

https://pubmed.ncbi.nlm.nih.gov/35081826/

At Bristle (oral microbiome testing) we advocate against broad antimicrobial mouthrinses as they can negatively impact your oral health similar to how antibiotics cause dysbiosis in the gut.

It’s been a while since I’ve used listerine, but anecdotally, the only option that left a seemingly cleaner mouth was the ‘original’ formula/flavor. I doubt it’s actually original. It also has the worst flavor.

Maybe someone who brushes teeth regularly also studies regularly, while someone who uses mouthwash cuts corners?

Or the alcohol / other chemicals.

Maybe alcohol absorbed sublingually?

At the current highest bid of $1.51m, it would be 13.2 years before breaking even (not counting taxes).

For that amount of money, I can think of better investments.

Is that the right way to view it? If you believe Listerine isn't going anywhere, at that price you're making a reliable 7.5% return that should track with inflation. On something you presumably could sell just as easily as you bought. Doesn't sound that bad!

This is not a great investment.

You can earn LIBOR + 7% on a BB rated CLO (Collateralized Loan Obligation) bond. Since you earning a floating rate (LIBOR) plus 7%, you would be far better protected against interest rate increases. The Listerine royalty is a perpetuity, which means that its value declines very rapidly when interest rates increase.

The value of the Listerine royalty has some natural immunity to inflation because the price of Listerine would increase with inflation, but it is difficult for manufacturers to pass on costs when it comes to retail consumer products like Listerine. The CLO bond is floating rate, so it is also protected somewhat against inflation.

You would need to dig into all the details of the Listerine mouthwash business before investing, and those granular details are unlikely to be available from the owner (Johnson & Johnson). The CLO bond will be backed by underwritten loans to 100+ large, private American companies across all different industries, so the commercial risk is far lower due to the diversification benefit of a CLO. The CLO structure itself also ensures that chances of the CLO BB bond defaulting are very low. The default risk can be reduced further by investing in multiple CLOs. You could also diversify beyond CLOs through other kinds of floating rate securities that have a similar LIBOR + 7% yield, for example Mortgage Backed Securities. With $1.5 million, you could construct a very nice structured credit securities portfolio for any target yield and risk level that you're looking for.

By the looks of this auction, the Listerine royalty is not easy at all to buy or sell. A BB rated CLO bond would be more liquid than this, and if you can afford to invest $1.5 million in a mouthwash royalty then you can also get an investment broker who can help you buy and sell structured credit bonds and perhaps even lend you money to increase your leverage if you want to.

The Listerine royalty belongs in a huge investment portfolio, such as a pension plan or hedge fund, where they have so much capital that needs to be deployed that they are forced to invest in highly obscure things like mouthwash royalties.

Still referencing LIBOR eh?

Im not sure your perpetuity model fully applies. It’s not a fixed rate perpetuity but adjusts with positive correlation to, presumably, inflation + growth + idiosyncratic brand value movement.

New loans have moved to SOFR as of Jan 1, 2022. There are still a lot of LIBOR linked loans outstanding. It will take some time for references to LIBOR to disappear from the market.

Why are you comparing a BB rated bond to a cash flow from an American staple of consumption for a hundred years? Everyone knows more risk comes with higher yield. That fact doesn't make one or the other inherently better: just a different position on the risk/yield curve.

Because the BB bonds are currently yielding LIBOR + 7%. A royalty stream is similar to a bond in the sense that you pay a price today to own an asset that will pay an uncertain stream of future cashflows over time.

BB bonds are several years max, LISTERINE is forever.

Having a finite maturity date is generally preferable over a perpetuity ("forever"). I explained above that the value of a perpetuity declines rapidly when interest rates rise (and interest rates will be rising in the near future). For example, the government of Austria recently issued a 100 year bond, which then fell nearly 50% in value as interest rates increased. A perpetuity is even worse than a 100 year bond.

With a finite maturity, you invest (let's say) $2 million, earn your yield for 5 years (let's say LIBOR + 7%) and then you get your $2 million back and you can decide then how to best re-invest your money at that time given the situation. There is a reinvestment risk here, where after 5 years you might not be able to find similarly attractive investments but unless you an insurance company or a pension fund trying to meet very specific long-term obligations you don't really need to worry about super long-term reinvestment risk. On the flip side, if you get your money back after 5 years you might be able to find an even better investment, and that kind of optionality is very valuable.

> earn your yield for 5 years (let's say LIBOR + 7%) and then you get your $2 million back and you can decide then how to best re-invest your money at that time given the situation

You have an 80% chance of getting your money back with BBs.

Also, I didn't read the specs on the Listerine contract, but I assume that if they raise the price of Listerine, then royalties scale with it. While in short term consumer staple prices are sticky, they scale with inflation over the long haul.

LISTERINE lives on, LIBOR is dead.

https://en.wikipedia.org/wiki/Libor#LIBOR_cessation_and_alte...

Where can one buy these bonds?

You need a broker and a couple million dollars to invest for them to take you seriously. The bonds typically sell in minimum $100,000 pieces.

You seem to need a couple million if you want to buy a Listerine royalty as well so there's that.

I view time as money, so yes.

I'm not convinced you could flip it for a profit quickly (taking in capital gains) and like property... there is a history of sales. You'd have to wait a period of time (>1 years) before selling it again, you'd never really realize that 7.5%.

As a safe counter example, for less money, I bought a condo in a popular beach community with low inventory and a lot of short term rentals. In the last year the property value has increased by a solid 23%. I could have also rented it out for revenue.

Depending on which numbers you plug in, the bidders seem to be evaluating it about where you'd expect. It's presumably pretty low risk but not risk free, it's presumably fairly liquid but it's a rather unusual asset, and it presumably tracks inflation pretty well. Add all that together and I certainly expect better than essentially risk free, highly liquid investments but not outrageously so.

The last auction for Listerine royalties ended with a winning bid of $561,000 on $32,040 revenue over past 12 months... or 17.5 year pay back!

If you had a $700k or so house, you could have mortgaged the house and used the Listerine to pay the mortgage!

Probably causes you to become insufferable about other brands, tho.

Imagine explaining that to a banker.... scratch that, I'm sure they've heard crazier reasons for taking out a line of credit on a house.

Yeah, a mouthwash royalty has a side effect of brainwash.

that's not bad, considering if you want to pass something to your offspring.

>> For that amount of money, I can think of better investments.

The group buying this contract can, too. But that's not the point of owning a diversified portfolio of assets that are of varying correlation.

EG is not the same as EV.

Well, after 13.2 years you'd have broken even and be up one Listerine royalty. I don't know of any investments that have dividend yields that high.

What are the better investments?

Stock index?

Property.

Cap rates in my city are like 2.5%. Where are these juicy yields?

That's why most real estate investors get mortgages. Then your ROI depends on the money down. Real estate investments benefit from leverage.

And then instead of risking the value of the investment, you risk 5x it? That's a completely different risk profile from the listerine royalties. What's the listerine yield if you lever it 5:1?

No, your risk is the mortgage, but it's paid by the lesee. Most people I know do it by putting down 10%, getting a 30-year mortgage for the rest, then rent it out. Eventually the property pays for itself. Let's take an example: a 100k fixer upper. You put down 10k, finance the rest. You spend 25k on remodeling it, so you can rent it out. The house brings in say 850 a month, making cca. 10k a year. So you make 10k a year on a 35k investment, which is a 28% ROI. Obviously before taxes, and any mainteneance etc. But this is how most retail real estate investment work.

10k/year on a property with a market value of 125K is a far higher cap rate than I see to begin with, but I live in a nicer area where a room in a house is the only thing you can get for less than $1000. I know there are much higher yields in Section 8 and slumlording, but that's more of a business than an investment because of the extra work involved, and one where I hear success requires a moral compass that I don't align with.

I agree with the jist of your comment, however providing section 8 housing is as good as one can do to help low income families (in my opinion).

If this is a good investment, and it’s only $2m, why doesn’t the company that sells Listerine just buy it? They would have more information than anyone.

Considering how many bids are exactly 1.4 million or so I suspect that’s closer to the real value.

It's it just me or do those counterbids from both parties look passive-aggressive?

Very. I suspect we’re looking into a community that has very well known members and the regular bids are coming from people trying to snipe it cheapish and the owner is responding trying to get a new sucker to bite.

It's a little different, but buying royalty rights has a very healthy market in healthcare. DRI Capital has done very well.

https://dricapital.com/

It's different than this royalty setup in that most of DRI's royalties are linked to a patent, but since many academic centers will get part ownership of a patent, it's easier for them to sell it off for cash today.

You can see who they purchased from: https://dricapital.com/our-assets/

I wonder why you don't see Johnson and Johnson bidding on it; if they acquire it they are effectively paying themselves at that point.

I've just seen some of the pop music royalties - I hope someone doesn't think buying royalties for singer X and then bumping them off is a good way to boost their earnings.

This kind of asset is exactly what NFTs (backed by real-world contracts) would be ideal for. I'd love to buy 1/100th of that asset just by interacting with a smart contract.

So.... let's say that was even possible, and you did that.

You pay: $20,000 in $some_coin (ignoring gas fees for the moment) 1/100 of annual royalties is $1,142, taxable at your marginal rate (say 20%), so $913 free-and-clear.

Even without doing discounted cash-flow magic, that gets you to an annual 4.5% annual rate of return. Not great, not terrible.

BUT, you're doing this all in NFT-land, which means either you hold it (in a cold wallet, ready to be shown once the next royalty agency asks who owns this stuff), some other entity holds it (and you trust them and pay their fees), and no one has stolen your metaphorical apes over the next 21 years, which is just what it would take to make back the investment. Also, making the double-bank-shot bet that courts will recognize NFTs as proof of ownership, and that the NFT itself does not become taxable property, as a security.

Short of some kind of presumably inherent joy in interacting with a smart contract, I'm really not sure what you intend to gain, here.

You resell it on chain to an ETH money launderer.

Bubbles hate you for being a prick.

Securitizing the Listerine royalty would require setting up a Special Purpose Vehicle (basically a legal entity whose sole purpose is to own the Listerine royalty rights). It would require bank accounts to be setup to process the royalty payment. It would be considered security and as such would need to registered and regulated by the SEC in order to be sold. All this would cost a several hundred thousand dollars in legal, administrative and banker fees. This would only make sense if several hundred million dollars worth of Listerine royalties were being securitized, and if there are investors who are willing to buy the hundreds of millions of dollars of resulting securities.

None of those securitization processes could be made more efficient, secure or cost effective with an NFT or any other blockchain technology. Introducing cryptocurrency into the securitization process would only be for the purposes of a marketing stunt that would make the process more costly, complex and risky.

You say you would love to buy 1/100th of an asset that has a list price of $2 million, so presumably you would be willing to invest $20,000. Well, I have news for you, multi-hundred million dollar securitizations are not done because someone says they would love to "interact" with a "smart contract" and have $20k to invest, they are done because multiple investors have promise to buy tens of millions of dollars of those securities. And those investors are interested in earning dollars, not "interacting" with "smart contracts" for fun and games.

So no, NFTs are not ideal for this kind of asset.

On the subject of (antiseptic) mouthwash, there have been studies linking it to diabetes in overweight adults [1] and mortality in hospitalized patients [2]. Nothing that conclusively proves causality AFAIK, but it does give one pause...

[1] https://www.nature.com/articles/sj.bdj.2018.1020

[2] https://pubmed.ncbi.nlm.nih.gov/33067640/

Look at this guy, trying to drive down the selling price. I'm onto you!

Someone should do a study to link the quality of studies over time to the implosion of credibility of studies. At this point, because the cancer that has been pervasive in “science” for decades at this point has never been meaningfully addressed, only fools and those personally invested in “the science” take any “study” with anything less than a metric ton of salt.

It is a shame, but if “scientists” are unwilling to actually follow the scientific method, maybe they are not scientists at all, but rather just run off the mill con artists. And for those who are not aware, “con artists” is short for “confidence artist“, i.e., a manipulative person committing tricks, i.e., fraud, through their ability to instill confidence in their target that they are knowledgeable or have a credible expertise in a field … confidence tricks.

I think your anger is misdirected. Take the diabetes study for example:

Scientists didn't publish the headline "Mouthwash twice a day increases diabetes risk by 50%". That was the press. The press are generally the ones who drop all the uncertainty/nuance and add the panic. And the scientifically illiterate public don't question how the headlines represent the studies and think each study contradicts the previous. Switching examples for a moment: does "eggs are bad" -> "eggs good again", etc. sound familiar? Bet you can't find studies that state that so absolutely though...

Instead, in the diabetes study the scientists showed a correlation, suggested a mechanism by which it might be true, described limitations of their data and analysis, and proposed areas for further study. And they answered questions from interested parties such as the author of the article I linked. This is real science. It moves slowly.

I'm interested to see follow-up studies. In the meantime, we live with uncertainty. A possibility has been raised but neither proven nor disproven, and it's a personal choice how we change our behavior. I think the article I linked had a good take—with the potential downsides, it's wise to look at how much benefit we get from antiseptic mouthwash as opposed to just brushing well and the like. YMMV.

> only fools and those personally invested in “the science” take any “study” with anything less than a metric ton of salt.

I think the real foolish move is taking a mainstream press article as representative of the study it describes with anything less than a metric ton of salt. You'd be wise to consider if you're doing this...

In short they seem to be saying "useful when recovering from surgery" / "increasingly looks like it could be a bad idea to use it all the time" / "once per day max" / "brushing and flossing are preferred".

On a slightly different topic - those of you who use Listerine daily, have your teeth become more sensitive?

No. But Listerine usage is often wrong -- even the recommended usage.

The "correct" flow for oral hygiene is as follows:

1. Flossing (removing potential bacterial food -- sugars -- stuck between your teeth, as well as disrupting streptococcus mutans biofilm formation)

2. Tongue scraping - you can use a teaspoon (removing potential bacterial food on your tongue, clearing streptococcus mutans hiding in your tongue)

3. Mouthwash (targeting the joins between your teeth and tongue)

4. Toothpaste (covering your teeth and gums in fluoride so it can react with your saliva to form fluorapatite)

The mouthwash exclusively comes before toothpaste, not afterwards. Using it afterwards essentially negates the whole use of the high amount of fluoride in toothpaste -- as would rinsing your mouth with water -- which is where your sensitivity may be coming from. Rather, after brushing, swirl the toothpaste in your mouth for about 20 seconds and just spit it all out and don't drink or eat afterwards.

Consider following the above at a bare minimum, as well as potentially using a toothpaste that contains nano-hydroxyapatite (i.e Apagard) or some sort of bioglass (i.e Biomin F) and don't rinse your mouth out after brushing and your sensitivity will go away within a day or two.

I generally floss after most meals and scrape the tongue along with the brushing (but do it after brushing). I use the mouthwash randomly (once a day), mostly when I have to meet people, and don't really consider it a part of my regular oral hygiene routine. Your recommendation sounds good but I don't like the idea of not rinsing my mouth immediately after brushing with the toothpaste - that will take some time to get used to! Thanks for sharing this.

It's arguably the most important step -- the fluoride has antibacterial effects and it's that phase post-brushing where the fluoride becomes fluorapatite and bonds to your teeth. Using toothpastes like Biomin which are really neutral in flavor makes it significantly easier, the hyper-flavoured menthol toothpastes on the shelf are much, much harder to bear. Neutrally flavoured toothpastes, especially after spitting out the excess, would leave a texture in your mouth similar to what you would experience after drinking a bit of milk or something, so nothing you'd really notice immediately and you'd completely forget about it after 30 seconds.

I haven't noticed that, but I always rinse w/ water after using it.

But the instructions say specifically to not do this: Do not rinse mouth with water or eat or drink for 30 minutes post rinse. ??

Yeah good point. My concern was that leaving it on my teeth all night would erode the teeth somehow. However, it looks like they did a study about that concern:

https://www.listerineprofessional.co.uk/safety-profile/pH

I’d also look into the “daily” part. All my bones are more sensitive than they once were. I’m in my 40s and starting to think all the days passing has something to do with it.

I just started to use it a few weeks backs (I brush and floss daily), and so was wondering if the sudden sensitivity I have been feeling was related to the recent use of Listerine. Hence my query.

Ah ha. Well, in that case, I'd certainly assume the recent introduction is likely a culprit but I'm no expert.

Everyone in the comments seems to know what this is about. Can anyone explain?

A fool and his money are soon parted

Jack and the Beanstalk

> ABOUT THE ASSET

The history of Listerine brand royalties is one of contract law legend.

In 1879, Dr. JJ Lawrence invented Listerine and in 1881, licensed the secret formula to J.W. Lambert and Lambert Pharmaceutical Co., ultimately settling on a royalty based on the number of ounces sold, to be paid to him and his “heirs, executors, or assigns” for as long as Listerine was sold.

For the next 75 years, the Lawrence family collected these royalties, with the ownership stake splintering between various heirs, some of whom sold portions of their stake to additional owners (such as New York real estate broker John J. Reynolds, who acquired half of the share of these royalties from the Lawrence heirs in 1950).

After Lambert Pharmaceutical merged with Warner-Hudnut in 1955, the newly merged management contested the $1.5 million a year they were paying in royalties in court… a case they famously lost in a decision that remains cited in contract law cases and classes today.

As a result of this decision, the Listerine royalty payments will remain in force for the lifetime of the brand, paid to whoever owns a share. Today, those entities include not only the heirs of the Lawrence family, but also various pension funds, universities, hospitals, and multiple individuals.

This is your chance to be part of this exclusive group.

Two things that stood out me, reading that too:

1) “This is your chance to be part of this exclusive group.” sets off all kinds of hype and peak bubble flag signals.

2) I have found it extremely difficult to find the actual text of the original agreement. Which is odd, considering that the agreement itself is the actual value based on the IP. That kind of nonchalant mentality towards assets us both too risky for me and also sends up even more peak bubble red flag signals when we are seeing NINJA type investing again.

Not directly related, but Listerine and other broad antimicrobial mouthwashes have been shown to have a negative impact on the oral microbiome similar to how antibiotics cause dysbiosis in the gut.

At Bristle Health, we advocate for products that foster an environment that supports your oral microbiome rather than destroy it, as it’s crucial to both your oral and systemic health. You can find more about our research here:

www.bristlehealth.com

I question the legitimacy of this service. You say that you're all about oral health but yet the marketing material [1] goes onto use the fictional condition of halitosis. Which Listerine basically [2] made up for marketing purposes because it sounded scientific. So aren't you just playing to peoples fears rather than actually trying to do so some good education?

[1] https://assets.website-files.com/621fba879a7423c6c3a5c77d/62...

[2] https://dentaldepotarizona.com/history-of-halitosis/

I’m glad you brought up the history of halitosis and marketing. In fact, the oft recommended twice-per-year visit to the dentist began as a pepsodent ad! It turns out that in low risk individuals, the frequency of dental cleaning and checkups did not improve oral health outcomes.

https://evidence.nihr.ac.uk/alert/dental-check-ups-every-six...

Now onto halitosis. Intra-oral halitosis is caused by volatile sulfur compounds and volatile organic compounds that are generated by microbes in the mouth: aka the oral microbiome. A number of studies have shown that halitosis is associated with specific bacterial species that have been shown to create these compounds both in vivo and in vitro. A good review on the subject is here:

https://pubmed.ncbi.nlm.nih.gov/32748883/

A number of clinical trials aimed at the efficacy of mouthwashes, probiotics, probiotics, lozenges have even been published. The general consensus is that mouthwashes offer temporary relief (through broadly decreasing microbial burden), and some probiotics are effective long term, but there is still much to uncover in this space as community dynamics of the microbiome are complex.

https://pubmed.ncbi.nlm.nih.gov/30834725/ https://pubmed.ncbi.nlm.nih.gov/27508274/ https://pubmed.ncbi.nlm.nih.gov/31799694/

There must be a misunderstanding here.

It seems your own citation [2] contradicts your claim that Listerine made up halitosis.

On the contrary it look like the article specifically makes a point that they did not make up the condition or the name of it.

Did they do anything other than adopt the Latin word and raise awareness of it in marketing?

They didn't make it up; it was coined earlier, but they certainly ran with it

Very interesting... So does that mean avoiding mouthwash altogether and only brushing with very simple fluoride toothpaste?

I'm guessing you don't cater to Australia.

Depending on your oral microbiome, there are more specific mouthwashes that primarily target anaerobic species that are implicated in diseases like gum disease and halitosis. Fluoride is highly effective at reducing caries incidence, but some newer ingredients also exist (such as nanohydroxyapatite) with high clinical efficacy if you worry about fluoride overexposure.

Additionally, depending on your oral microbiome, and your risk for oral disease, we recommend other products that can reduce your risk of disease and prevent the outgrowth of species implicated in oral disease.

Unfortunately we don’t ship to Australia yet! Someday soon I hope!

How do you feel about Closys for targeting anaerobic species?

Brush your teeth regularly, eat decent foods, user a waterpick and/or floss a couple times a week, and get a dental cleaning periodically.

You can find out more about my theories here:

www.stopfallingforshittybiomestartups.com

Regular oral hygiene is a decent predictor of oral health. However this does not explain why the incidence of caries and irreversible gum disease are so high. Almost half of all Americans have some form of gum disease, which we can predict using the oral microbiome, which are the same people that regularly see a dentist and have “normal” hygiene habits.

Let’s stop normalizing reactive medicine and start thinking about personalized preventive approaches to health. There is no one size fits all approach to your systemic health, and the same applies to oral health.

I was in my thirties before I was taught to floss halfway correctly, and since then my gums have sorted themselves out great. I think we just don’t educate people enough on this.

Please share the correct way! I didn't realize I'd been doing it wrong all these years.

A link to brushing and flossing correctly is below! In summary:

- Brushing: Hold your toothbrush at a 45-degree angle. This is the best angle for cleaning both the surface of your teeth and inside the gumline (killing two birds with one stone).

- Flossing: Use the "C Technique". Wrap the floss around the side of your tooth in a C-shape, and gently guide it up and down the length of your tooth and softly below your gum line.

[1] https://www.bristlehealth.com/post/brush-and-floss-correctly

If you're regularly seeing a dentist and still develop gum disease then you really ought to find another dentist.

doesn't the alcohol content in listerine increase the risk of oral cancers I read somewhere?

Maybe? There seems to be evidence that alcohol based mouthwash is an increased risk when associated with other factors (most notably smoking, drinking, and betel nut chewing), but not much data to show it is an independent risk factor in itself.

Here is one study and a meta-analysis for reference:

https://www.sciencedirect.com/science/article/abs/pii/S13688...

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6982979/

Any alcohol would most likely, it is not very good for you. Really, anything that causes a lot of repair to be needed due to cell death. For example, hot drinks, smoking, hydrogen peroxide, life.

Stoped used it due to hypogeusia:

https://en.m.wikipedia.org/wiki/Hypogeusia

Never seen this kind of thing before, but I wonder if there's a decent way to scam the music side. Invest a few months of return into click farms to buy streams for some of your licensed music, see if any of the algorithms decide it's popular now and you get more money in your pocket.

Please don't.

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