Tuesday, 12 December 2017

Come out you punks wherever you are - Brewdog needs you.

Brewdog launched its own EFP V a while back. The aim was to raise £50m and the initial target was £10m. Things are a little slow.

As ever we prefix this post with the usual stuff about how brilliant Brewdog are and what a massive success their EFP campaigns have been - until now.

We have been following EFP V since 28 October. It started out strongly enough but was soon having days that fell well below the required input level to get to £10m. As of the last two weeks, the campaign has been chugging along at £40-60k per day, when it needs to be at around £100k to cross the line. If the current trend continues it will be a couple of Ms short. 

So if you love Brewdog and that crazy man in the hat - get your wallets out and give him some luv. He launched a new promo for this round a few days back named Equity for Pups - apparently people like to buy their dogs shares in BD. Really?

It seems the problem maybe the low numbers of existing punks returning at the current valuation - something we wrote about a while back. The ROI rubber band has been stretched to breaking point.

Coming as this does on the back of the failure of their US punks campaign, does it signal the emptying of the well? Its a little early to call that one but its now or never for you punks and punkets - only 34 days to go with just under £3.4m left to complete. 

As it is their own campaign, any shortfall will probably be called a massive success anyway. Raising £8m certainly isn't bad but its not quite Carling.


  1. How the F can they do this.....

    No FCA regulation - this is clearly a financial promotion which is covered by The FCA. Breaking this law offers a maximum sentence of 2 years in jail.


    Such a blatant breach for such a large amount of money is just a disgrace.

    The scheme operators are liable for any losses experienced by the investors, though, if you can ever get any money out of them

  2. It's still a big raise but was bound to run out of steam because 1) the valuation has to be inflated to perpetuate the myth that BD is a £1bn+ company and all previous EFP round investors have made a cracking return and 2) any chance of an exit, including the shambolic annual trading days, keeps being pushed back. Both put off serious investors and you need some bigger tickets to get to these sort of amounts. What I don't get is why BD persist with EFP when it no longer offers anything like the market depth they need and they have alternatives. They claim it brings in new, loyal customers but you don't need shares to buy beer and it must take up a huge amount of management resource which could be better focused on running the company. No idea what the above comment means, I don't think missing a fund raising target is a crime.

    1. Advertising financial offers and financial transactions is a crime unless you are regulated by The FCA. They are not, or at least don't say they are.

      Sounds like no institutional funds will touch them.

      But apart from their raise being illegal,,,

      ,is the beer any good.

      if it is, they may have a business, if it isn't once the Crowdfuding dries up, so will theor business

      I have drunk it once and prefer others

    2. I hate to get drawn into pointless online debate but sometimes it's hard to resist.

      The first words in the prospectus you provide a link to but presumably didn't get past the cover of;

      This document constitutes a security note … prepared in accordance with the Prospectus Rules made under section 84 of the Financial Service and Markets Act 2000 and has been approved by the Financial Conduct Authority

      but if you are still worried maybe call a policeman

      "Sounds like no institutional funds will touch them", maybe, although the £213m they raised from PE house TSG this year was sort of touching them a bit (albeit on much better terms than they are offering to crowdfunding investors)

      "if it is, they may have a business" - how would you define a business? The starry eyed and easily impressed among us might argue that a 10 year trading history, c. £100m pa revenue, 2 breweries, exports to 60 countries, 50 bars, 800 employees, £1bn valuation (ok, that bit is a joke) is sort of a business.

      BD may not be the punk revolutionaries they purport to be, it's hard to reconcile management taking £113m out of the business at one price then asking investors to buy in at almost double that price 6 months later and investors might be better off putting their money elsewhere, but you seem to have mistaken them for start up chancers, and very naughty ones at that.

  3. BD also do not help themselves (in my opinion) by the dismissive way EFP questions are handled on their forum, often by well-meaning but totally unqualified staff ("I wouldn’t want to invest in a company that’s main purpose was to generate profits that it can then pump back to shareholders" was one response to an investor question, and which rather neatly sums up what an investment is in my book). Management persist in pretending that the preferred C shares have the same value as B shares and treat anyone who questions that false premise like a heretic, which blows the credibility of any valuation. BD is a fantastic business and a great investment opportunity at the right price, but they have proved they can get institutional investment at the scale they need, have ambitions to partially IPO and could certainly borrow more without excessive risk, so the only real rationale I can see for persisting with the headache of ECF to scrape together sums that are no longer strategically helpful must be because they think EFP investors will overpay; "Management think I'm dumb enough to buy this at a price someone with a clue would laugh at" isn't a compelling investment thesis, but £8m so far disagrees with me.

  4. I'm pretty sure they see it as a way to sell more beer. I believe shareholders buy more of their beer and evangelise it, go to the bars, take their friends, buy from the website, tell their friends. I do. Clearly they could get more money more easily by other means as per the comment above. Personally I'm not interested at this valuation - never going to be a ten-bagger starting at 1.8bn, but i think for Brewdog it's more about the people putting in GBP95, and in that respect not a failure at all.

  5. I did the tour the other day. I ended up waiting for the plane next to a guy who was clearly from BrewDog (wearing the t-shirt, stickers all over his laptop...). I asked him what he did there, and he said he was the Head of Investor Relations. (I think his exact title had a more BrewDog flavour, but...same thing.) I thought I'd go for the wind-up, so I started saying how, despite loving the beer, I wouldn't touch the shares with a bargepole, as there isn't a brewery in the world making 18% to pay off those preference shares. He pretended(?) not to understand for a while, and when I asked how they were ever going to cover that, he said that he had tried to ask a similar question, but was told he wasn't allowed to.

    This is the Head of Investor Relations, not allowed to ask the CFO how a massive deal affects the value of the shares.

    Can highly recommend the tour though. The pre-mix tins of Lone Wolf and tonic are also surprisingly good.

  6. the typical BD response to any questions on the preferred shares and the nonsense of using the price paid for these to infer a value of £1bn essentially gives you 2 options; i) the management do not understand the difference between a share with capital protection and preferred return and an ordinary share, in which case they have sold 23% of the company without knowing what deal they have done, or; ii) they do understand but they think the investors whose money helped them build the company and whose money they want again now are so stupid and contemptible that they can fobbed off with any old rubbish and a couple of vertiginous graphs. Take your pick which one it is, the question is are you happy with either?