Friday, 2 December 2016

Brewdog issue 7.5% 4yr Bond via Crowdcube to fill funding gaps in USA



Brewdog have launched what looks like an attempt to raise much needed funding for their US development - on the back of the US fundraising failure.


No one could argue about BD's success and the style they used to get it. 2015 EBITDA of £5m speaks for itself. 

But the US adventure may have been a mistake. They have a half built $30m facility in Ohio but do not have the money to finish it or pay to run it. Running costs in the UK have increased and higher turnover is producing flat profits. 

The US fundraising, which has been running for many months, has only raised $3m of the intended $50m. They announced this week that they are offering some ludicrous double or quits deal to try to PRing the raise into action. It has just really made them look a little silly.

Does the Brewdog message really translate into American? They wouldnt be the first UK success to fail over the water. And the US has had its own craft brewery explosion, so its not like BD are offering anything new.

Now in another attempt to breech the cash gap, they have announced a Bond with Crowdcube. Whilst this is safer than equity investment in principle - it gets paid back in 4 years with annual interest of 7.5%, if Brewdog dont manage to get the US facility funded and up and running then all bets are off. 

If the company gets into trouble then the bond is just as at risk as the equity in terms of repayments. It will be interesting to see how it goes.

One question worth asking is was this Bond in the plans a year ago? 

The other one is why is the Bond's minimum investment only £500k and max £10m. What difference will £500k or even £3m make?

According to James Watt, this is 'Funding for the 21st Century'. Well that maybe so but the basic business model of cash in and cash out hasnt really changed much since the 12th Century. If you run out of cash you go bust. 

2 comments:

  1. I have a feeling you are going to be saying "I told you so" for a long, long time Rob :)

    Great work, thank you.

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  2. How much punk IPA did they drink before deciding to launch in the US:
    http://www.marketwatch.com/story/opening-a-brewery-in-the-us-you-now-have-5000-competitors-2016-12-09

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