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Lights, camera, return on film investment




2 min read

Simon West – the Hollywood director behind films such as Tomb Raider and Con Air – is offering SyndicateRoom members the chance to be part of cinematic history by investing in his latest movie, Salty.


 

Shareholding and valuation:

Movie finance works in a different fashion to the typical growth company. If you own 10% of a standard company you can expect 10% of the dividends or 10% of the value at exit. However, movie proceeds are generally distributed in a slightly different manner to direct shareholdings.

Salty Film Ltd was created with 300 A shares issued to Simon West and the producers. All investors will get B shares at a price per share of £1.

After the funding round is completed there will be 1,800,300 shares in issue, with all shares sold at £1 per share. This assumes £1.8 million being invested in total. As per our vision at SyndicateRoom, our members get the same class of shares, at the same price per share, as the lead investors.

Simon West and the producers will own 300 A-class shares in total to keep artistic control, while all investors will receive B-class shares and will own 99.98% of the total number of shares.

This results in a pre-money valuation of £300 with 99.98% of the company on offer.

Revenue distribution waterfall:

The really interesting thing about Salty Film Ltd is how the proceeds are distributed to investors. Investors will get their money back first from any proceeds Salty Film Ltd generates, and only after equity investors’ capital is returned in full will Simon West, the producers, the actors and investors share the proceeds.

Salty Waterfall

Assuming $5 million is raised:

1) The first $6 million that goes to Salty Film Ltd is distributed back to shareholders first, so investors get their money back first

2) After equity investors are repaid, the rest of the profits are distributed as follows:
- 25% of profits to investors
- 25% of profits to Simon West and producers
- 50% of profits to talent to attract top movie stars

Example assuming global box office takings of $50 million (every single Simon West movie with theatrical release has taken at least $60 million) and that $5 million is raised:

Worldwide box office $50,000,000
Total Proceeds for Salty Film Ltd after expenses (distribution, marketing, presales, etc) $18,055,952
Repay equity
$5,000,000
Corporate tax
$2,741,750
Total proceeds for distribution $10,314,202
Proceeds available to investors (25%) $2,578,551
Proceeds available to producers (25%) $2,578,551
Proceeds available to talent (25%) $5,157,101
   
Investors’ return  
Repayment of equity before distribution of proceeds $5,000,000
Proceeds for investors (25% of proceeds) $2,578,551
Total $7,579,551 (excludes EIS relief)


The above shows that if the $5 million of equity investment is taken, investors are estimated to get back $7,579,551 (c. £5.46 million), which represents over 50% return to investors before EIS is taken into account and assuming that the movie has a global box office take of $50 million. The smallest global box office takings for any Simon West movie with a theatrical release was The Mechanic with $62 million, which is 20% more than the $50 million assumed above.

Risk warning: tax relief depends on an individual’s circumstances and may change in the future. In addition, the availability of tax relief depends on the company invested in maintaining its qualifying status.


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