Scottish craft beer brewing company seems to have taken the world by storm, so it seems like a no-brainer to invest in their company, right? Read on to find out everything you need to know about Brewdog and its shares.
So who is Brewdog anyway?
Brewdog is a bit kooky, to say the least – and has gone viral for everything from legal disputes about their Elvis IP, to taxidermy animals. But beyond this viral marketing image, what actually is Brewdog?
They define themselves as a UK-based craft beer brewery and small pub chain business. It was founded in 2007 in Scotland, beginning its life manufacturing beer, ale, and lager for retail and online purchase. A few years later, they expanded into the bar trade, after purchasing an outlet located in Aberdeen, in the north of Scotland.
Since then, the company has gone from strength to strength and has a bar portfolio of 78 global sites, (as of 2018), with locations in Las Vegas, Brisbane, Shanghai, and Tokyo. They have also expanded into the hotelier business, and have a range of hotels, including ones in Ohio, America, that they have claimed is the ‘world’s first craft beer hotel’.
Even though they have had rampant commercial success, much of the brand’s notoriety comes from their vibrant and audacious marketing campaigns. They have controversially named a beer after a cocktail of the class A drugs, heroin, and cocaine, they parachuted taxidermy cats over Wall Street to symbolize the death of the city ‘fat cat’, and all the founders changed their name to Elvis, after a legal dispute over the name of their ‘Elvis Juice’ beer.
In Novermber 2021, the company had raised over $30 million across private equity rounds, and through crowdfunding, they export products to 60 countries, and has a cash turnover of around the $200 million mark annually (as of the company’s 2020 accounts), and employs nearly 1600 people worldwide.
How does Brewdog make money?
Like many companies, Brewdog operates on a predominantly commercial/retail level. The 12 pack of their signature beer (a 5.4% ABV Punk IPA), is sold on the company website for £14 (around $18.50), and a 24 pack of their best hits (including a New England IPA, a session beer named ‘Clockwork Tangerine’, as well as many others) is priced at around £30.
Although their bar and hotel business was thriving before the COVID-19 pandemic hit, it was hit hard by lockdowns and travel bans, meaning that the company suffered a financial loss of £9.2 million ($12.2 million) in the 18 months from December 2019.
According to the Financial Times, Brewdog reported £182 million in net revenue last year, making them quite a profitable organization. According to the most recent valuation of the company, Brewdog is worth $2 billion, and the founders, Watt and Dickie, have $480 million and $400 million stakes respectively.
What is the Brewdog strategy?
Although Brewdog’s company ethos began as just making good craft beer, they have developed more of a sound financial strategy too since their inception 13 years ago. The key source of funding is a crowdfunding ‘Exchange of Futures for Physical’ scheme, called ‘Equity for Punks’ which was launched in 2010. The scheme has attracted 150,000 global investors and has raised around £80 million.
The companies marketing is sometimes seen as gimmicky and has attracted negative press in the past, as well as negative publicity for allegedly having a toxic work environment, and a poor track record with investors.
When is the Brewdog IPO?
IPO (which stands for initial public offerings) is the first chance that companies give most investors to invest in a company’s stock. A private company will list its shares on a public stock exchange.
It looks as though Brewdog is preparing to go public with shares on the London Stock Exchange, although with the unpredictability of the stock market after the COVID-19 pandemic, it is difficult to judge the conditions and time of the flotation.
In October of 2020, the Brewdog corporation managed to raise an additional £7.5 million of cash through a fresh round of crowdfunding. Currently, there are shares in the company available through their Equity for Punks scheme, which cost £25.
Should I invest in Brewdog? What is their model for investing?
In all honesty, it is difficult to say. In some respects, Brewdog seems like the perfect company to invest in – even through the pandemic, the company turned a major profit, and has seen rapid but steady growth since they were founded.
They are very popular across the globe, especially with younger generations who like their environmental and independent stance. This seems like it would secure Brewdog’s long-term growth. But, Brewdog is not free of scandal.
Recently, over 70 ex-Brewdog employees signed an open letter (along with 45 former staff members who did not feel safe enough to include their names).
The letter claims that there was a strong vein of misogyny that ran through the company and that the management perpetuated a culture of fear. One line in the letter read, ‘Put bluntly, the single biggest shared experience of the former staff is a residual feeling of fear’.
This was the latest (and largest) big blow for the independent brewery, and put a huge dent in their public image. The letter accused the company of being ‘built on a cult of personality, and quickly put an end to Brewdog’s self-built illusions of being a great employer.
This, inevitably, had a negative effect on the price of Brewdog shares, with many investors saying they regretted putting money into the company, and it is thought that their (somewhat murky) value plummeted.
This scandal seems like it was the beginning of the end for Brewdog shares – multiple articles were published in large trading publications, including the Financial Times and Money Saving Expert, which generally said Brewdog’s promises were a little too good to be true.
This is because Brewdog primarily uses an EFP (Exchange of Futures for Physical) model for their investors. An EFP is where two parties (in this case, the Brewdog corporation and wannabe Brewdog investors), strike an agreement to trade a futures position in return for a basket of underlying actuals. I.e., investors trade money in return for a set of ‘perks’ and potential financial gains from Brewdog.
Investors that had previously bought into the ‘disruptive outsider’ image, many of whom were just average avid fans of the company. The so-called ‘equity punks’ have helped to bankroll the global expansion of the company, but many are now saying that they have seen little return on investment.
New investors don’t stand much of a chance of seeing a return on their investment – Vinepair has said that Brewdog’s financial filings and EFP (Exhange of Futures for Physical) material suggest that the company is overvalued and that a major private equity firm’s holdings will cut into Equity Punks’ returns at IPO, unless the company can keep growing at industry-beating rates. The company has done 11 rounds of EFP, raising $585,000 and £27.5 million in the US and Britain respectively.
Taking all this admittedly complicated financial information together, the first thing to stand out is that the company’s financial dealing does seem to be at a juxtaposition with their non-business business ideology. EFP is a far less regulated and illiquid way of selling shares in a company, compared to traditional shares that are traded on a stock exchange.
Are there benefits to investing in Brewdog?
There are a number of perks that Brewdog offers alongside their Equity for Punks, such as discounts at their chain of pubs, and free booze, as well as branded swag, but monetarily, this is nowhere near the value of the investment put in.
There is also evidence that Brewdog has struggled to fulfill these promised benefits. Many investors have been left without their promised beer, with long-delayed delivery of items, or reduced ‘lifetime’ discounts.
There are two ways to cash out your Brewdog shares – either find someone willing to directly purchase the shares off of you, or find a dedicated stockbroker that has specialized in Brewdog shares.
At a company-run ‘trading day’ in 2019, where Equity Punks get together to trade shares, the price for a Brewdog share settled at £15, which is 40% lower than what the company was selling them for at the time. Although this was two years ago, there remains to be ambiguity about the price of a traded Brewdog share.
If you can overlook the issues with the Brewdog corporation, such as their allegedly toxic work environment, and seeming exploitation of avid customers, and would like to invest in the company, then we suggest going for their shares that are traded on regulated, large stock exchanges.
Despite promises, as of November 2021, Brewdog has yet to list on the London Stock Exchange. Their EFP ‘Equity for Punks’ scheme is the only way to buy shares in the Brewdog company. Though, you do have the potential to sell your shares, and they come with a selection of benefits (from booze to discounts on booze). We recommend waiting out the ‘Equity for Punks’ EFP scheme and investing if Brewdog hits the stock exchange.
Long haul Brewdog investors, who have been around since the inception of the EFP equity scheme in 2010, have seen huge returns on their investment – but the time for this seems to have come and gone, especially now it seems more difficult than ever to sell. At the time of writing, Brewdog shares are rumored to be hitting IPO in late 2021 or early 2022.