Tuesday, 26 September 2017

Brewdog launches equity crowdfunding Punk round 5?



What are Brewdog up to? A new £90m round has just been announced with much of this supposedly coming from Punk Round No.5. No.4 flopped.


We will start with our usual caveat when discussing BD. It is a great company that has grown very quickly.

So that aside, the US Punk Campaign only managed to raise $7m of its $50m target and was closed this year. Then BD sold around 23% of itself to a West Coast PE firm; we at the time said this was a direct result of the failure of Punk 4. Now their plan is to raise a total of $180m, with half of this coming from ECF. Are they short of cash? Has the Ohio operation overstretched them?

We will just have to wait and see. It has certainly been in the news, which is what wags this dog's tail.

13 comments:

  1. Budweiser would struggle to raise 180M spare Capital.
    This Dog bitten off more than it can chew.

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  2. You might want to do a bit more research and modify your views accordingly. EFP IV was the largest supported crowd-funding ever in the UK. The recent EFP in the US was the largest crowd-funding in the USA. Neither of these 'flopped'.
    Are they short of cash? - No.
    Has the Ohio operation over-stretched them - Not at all.
    Do they want more cash to fuel their incredibly ambitious plans - Yes.

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    1. There is always one. EFP US was a flop - $7m of the $50m total only. How do you 'know' all these facts you state? Are you The Hatman? Look, as we said it is a great company but......

      They had to sell 22% to corporates on failure of US funding. Look what they said about Camden when they bailed out!

      $180m is an ambitious (im being facetious) number. Wish them all the luck, we were just surmising. No one has to agree.

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  3. Plus EFP meets other strategic objectives. I doubt EFP 5 will make as much as EFP4 but they want more finance and this is a good way to get it as it unlike other forms of finance it adds new customers who are particularly loyal due to their ownership. They'll probably have to get finance from various sources and will no doubt be labeled failures for that, especially by this blog who i recall was tipping them to go bust not so long ago (or at least hinting that way)!

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    1. Dear Jim - we have always started any post on BD with stating what a great Co it is - so you need to pay more attention when reading them. The post was merely supposed to ask a few Qs about the Hatman's strategy. No one with any sense could label this company a failure. It really says more about you than anything here.

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  4. Seems odd to raise money from punters when they are giving 20% of profits away...

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  5. I think BD are just exposing the limits of the ECF model, at least in the absence of a functioning secondary market (and the trading days are not a functioning secondary market). It's a capital intensive business so as it grows the scale and frequency of new capital required follows the growth. By repeatedly coming back to the ECF market the valuation has to go up so much between rounds to mitigate the dilution that the investment opportunity struggles to look attractive for anyone other than hobby investors looking for add-on perks and that doesn't get you £10s of Mms new money. While it might be a bit at odds with the punk persona (and there is a world of difference between branding and financial strategy), the PE stake sale is, I think, the acknowledgement that BD has outgrown the ECF market in its current form. At least EFPs get to stay in, and get a tiny bit of cash out at a fantasy share price based on a preferred instrument. I imagine that if they had sold out instead then you would have noted that EFP 4 investors had hardly had the chance to make a return, as you did with Camden. So, do I think EFP V will shoot the lights out; no. Is the valuation inflated, yes, but the EFP 'flops' and the PE sale are the consequence of outgrowing the ECF investor base rather than early warning signs of impending problems. A decent secondary market would solve that problem pretty quickly. Just surmising, no one has to agree.

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    1. Actually looking at this again - no high growth Co's do not need to rely on new funding the whole time - they reinvest profits. BD not quite there yet but wont be long before they can do this.

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    2. Capital intensive, high growth phase businesses do generally require more capital on a regular basis, although I agree that as they mature they have more cash and lower capital expenditure (relative to their size), so can become more self funding. Also as they mature they tend to use more debt rather than equity for new capital because they can and it's cheaper - I expect BD will borrow more, particularly with a PE investor on board.

      BD product looks pretty mainstream these days (how many US style IPAs can the world need), but that's partly an indicator of their success. They got going early enough to have market presence that others will struggle to replicate and craft beer still only accounts for a small proportion of the overall beer market. How they will balance their ambitions with staying 'punk', who knows, but I don't think EFP V, VI or VII can get them anywhere close so there will be more institutional money along the way. Some might think that's selling out but for EFPs who think they have an investment rather than a club membership I think it will be welcome.

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    3. Maybe - i think there is an argument for seeing BD as a massive marketing scam ( a bloody good one) which may well end up imploding as they become irrelevant and sales drop. We will just have to wait and see. The companies cache is its punk image - wearing thin already.

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  6. Agreed. But what happens if this round bombs - looks unlikely at the £10m level given its progress so far - but £100m seems unlikely. What will BD do if it cant expand? Essentially the product is over hyped and very average and the momentum is based on the crazy hatman and his drive for world domination. Seems to me without that they may well see sales and interest fall away.

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    1. To add - Punk was a phase - v loud and highly noticed for a short while then people got bored of the same old thing and it faded away not really to be heard of again in any meaningful sense. A lesson?

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    2. Vivienne Westwood has a very successful business with 63 outlets around the world and a Luxembourg domiciled parent company, Johnny Rotten advertises butter; rebellion adapts where cash is concerned!

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