Wednesday, 21 October 2009

Equity for Punks


That BrewDog thing. It’s been the beer event that we’ve been waiting for thanks to their viral marketing and social media campaign. Now we all know that it’s Equity for Punks there seems to be a lull as if it isn’t as significant or groundbreaking as perhaps everyone hoped. But come on, this is a big deal. And never ones to shy away and get on with things quietly, this is also a brave move: they are offering out their pup for anyone who wants a piece of it.

The financial guff involved in this deal literally means nothing to me; ask me to string together a sentence and I’ll do it, ask me to answer a mathematical puzzle and I fall into a swirling tomb of numbers and symbols. What I do know is this: if I give them £230 then I will ‘own’ a piece of BrewDog. I will also get 20% off any orders I make online and with each beer I buy I am financially supporting my investment. The amount of equity I’d get for my money, assuming I buy just one share, is 0.0009%. This isn’t really all that much, so do I want to own such a tiny amount of them? You know what, that’s not the point.

I think I’ll be echoing the sentiments of others when I say that I’d like to be a part of Equity for Punk just to be a part of the brand. I wouldn’t go into it expecting to make a handsome profit but I would go into it to support what they do. You see, I like James and Martin. And I like what they do, in and out of the brewery. They are young, they come across as shy in person (passion is a great thing to fight through shyness) and they are ultimately just trying to run their own business and make a living. Punk marketing, viral campaigns, controversy - it’s just part of what they do and an integral part of their brand. And what a brand they have developed in such a short period of time.

I guess the question that needs answering is will I buy equity? The answer is no, not right now (beer blogging doesn’t pay so well and £230 is a lot of money to me). The price might put a lot of people off, especially at the younger end of drinking where their brand affinity is closest, but that’s the amount they want for one share and one thing is for sure with BrewDog: they know what they want and they don’t want to compromise. If I had the money then I’m pretty sure that I would buy in, even if it’s only one share, and in the future then maybe I will. But like I said, it wouldn’t be for the financial investment. It would be for support, kind of like buying a football season ticket (of course, this sort of thing has been done with football clubs too).

I buy into the BrewDog ethos and mentality every time I purchase and drink their beers. I feel a kinship to the way they think, I like their beers, I like that their beers have become events, I like talking about their beers, I like drinking their beers, I like how non-beer people now know about BrewDog and I like what they are doing to the British brewing scene. Equity for Punks is a brave, balls-out move. So what if people think they have over-priced themselves, this is about more than just a number and a pound sign, this is about being a part of the most progressive brewery in the UK and following them with a more vested interest for now being involved. Love the beer, own part of the company, care a little more about what they do.

17 comments:

  1. "I buy into the BrewDog ethos and mentality every time" - it is called clever marketing. I might well buy into them but only for sound financial reasons.

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  2. Care about what they do by continuing to buy their beer.

    Ponying up £230 for the square-root of bugger-all is bonkers.

    They are asking you to support their own valuation of their business at TWENTY-FIVE-AND-A-HALF MILLION(!!!) POUNDS.

    Their turnover is £850,000!! Impressive for a start-up micro in the UK, but it's 1/30th of what they're telling you it's worth.

    And to quote Duncan Bannatyne: "turnover is vanity, profit is sanity".

    By their own admission they are basing their valuation on the "brand" and the management team and vision!!

    There is NOTHING sound about that valuation, and therefore NOTHING sound about the investment opportunity.

    This is hubris of the highest order, and to suggest that there is any merit in it whatsoever (other than to reel in 10,000 mugs with a bit of cash lying around) is utter nonsense.

    Financially, you'd be better buying £230 quid's worth of their beer. At least you'll get a return on that investment.

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  3. I completely agree with the sentiments of Mr Pencil-Spoon, this is about the beer and not about shrewd financial investments.

    Being one of the "mugs", I can safely say that I didn't put my money in as a sound financial investment, and the irony being that I am in the position to put the money forward because of genuine investments. It is clear to everybody that the numbers don't add up in the slightest but that is not the point, even if they did, who the hell would invest in a brewery at the moment, with the government clearly targeting alcohol after their successful inhalation of the tobacco industry. And, what sort of a dividend would you expect from a £230 investment?

    Anyway, I don't want to get into a pointless slanging match about the whole thing. BrewDog are putting out great, innovative beer, which is somewhat of a rarity in the UK, and I for one want to see this continue.

    Nice article Mr Pencil-Spoon, as always.

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  4. James, BrewDog22 October 2009 00:03

    Bangor,
    thanks for quoting Bannatyne. The quote however is polarising and misleading. We are not concerned about profit. We are concerned about growing a brand and a business braking even. Exponential growth and braking even is a powerful message. We want our brand to grow - profits and constantly re-invested in real time to enable this growth.
    Our turnover will be £1.8m+ in 2009. It was £800k in 2008 - this was in our first full year of trading.
    Every brand starts somewhere, I know of many multi-billion dollar brands turned over much less than £1.8m in their 2nd full year of trading.
    I would also add that our most valuable assets are not on the balance sheet - these are our brand and our people. Keith and Tony (and they are both shrewd and expert) at £5m in June. Since then we have doubled our capacity and opened up new markets. the most significant value adding factor being Keith and Tony themselves - their track record is nothing short of phenomenal. They built their last project - Skky Vodka to a billion dollar brand. BrewDog is their new baby.
    So what do you get for £230? A pretty cool brand with Martin, myself, Keith and Tony trying our heart out to turn this into a huge international success for everyone involved. I guess the question to ask yourself before investing is do you believe in the brand and the people behind it? Keith and Tony have a huge history of insane successes, the BrewDog brand is already internationally recognised and Martin and I are completely committed and dedicated to the future of the business.

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  5. Yes, but name the profit. Turnover means nothing on its own. How much profit last year and what's your expected profit for this one?

    And you've given no business reasons for the padded valuation. It's simply not enough to know that you've got a funky brand, a strong team and that you'll be putting your heart into it.

    BrewDog could still be a flash in the pan.

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  6. "So what do you get for £230? A pretty cool brand with Martin, myself, Keith and Tony trying our heart out to turn this into a huge international success for everyone involved. I guess the question to ask yourself before investing is do you believe in the brand and the people behind it? Keith and Tony have a huge history of insane successes, the BrewDog brand is already internationally recognised and Martin and I are completely committed and dedicated to the future of the business." Nicely put James.

    I think we can all agree - probably even James et al. - that you could turn your £230 into a lot more by 'investing' it differently (shares which soar, a 10-1 horse, buying a bucket, a sponge and some shampoo and washing cars). If you believe in BrewDog then investing in this equity is no less sensible than just wrapping a little spare cash up in your savings account. Investing in BrewDog is an investment in people and in potential, just like any good investment should be.

    As long as the beer still tastes good and I can get more of it then I'm a happy drinker and that's where my money will be spent - that is a sound investment (as my full fridge/cupboard will agree!).

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  7. I'm in the same boat Mark, not able to invest right now but I'm verging on wanting to, just as I wanted to be involved in myfootballclub.

    Rightly or wrongly I just want to be part of something, an experiment, whether it's a bad investment or a cash cow, I don't too concerned. If I wanted to make quick profit I'd hedge my bets elsewhere perhaps.

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  8. I'd agree if they'd priced it differently. At £50 a pop, even with the same valuation - and maybe just a 10% discount - I think you would already have invested, as would I and so would many others. At £230 (a third of the rent, three times the council tax, supermarket shopping for a family for a fortnight), you look at the valuation.

    At £50, you'd chalk it up as a punt and cheerfully help the boys on their way.

    It's the fact that I wish BrewDog well that I wish they'd priced at £50. I think they'd raise more money and the Punk ethos should surely be about accessible quality.

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  9. I think Mark gets it spot on in his original post. It's more than just money. I'd much rather loose £230 on BrewDog than putting £5 a week on the National Lottery a week for a year, and I bet more than 10,000 people do that. I reckon, with these guys in charge I'm odds on to get my money back anyway. There seems to me, looking further into the detail, that I could see a doubling in my money within around 3-5 years if expansion goes to plan, but I'd admit that the risk is there.

    I might also loose the lot, but I think it's unlikely. People who just don't have the money should not invest.

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  10. This comment has been removed by the author.

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  11. 'I might also loose the lot, but I think it's unlikely. People who just don't have the money should not invest'

    Well, quite. But my point is this: if Equity for Punks is a serious capital raising exercise, increasing the liquidity of shares would in all likelihood increase uptake considerably.

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  12. James, BrewDog22 October 2009 13:50

    Just a quick note on the £230.

    The problem with making the individual shares cheaper is the huge transaction costs involved. If we had pitched the shares at £50 each, almost 50% of this would have disappeared in the various transaction costs (Official register, receiving agent, card fees, online check-out and the physical certification). In this case 50% of what people would have invested would have not helped us grow the business they have invested in which we felt did not make much sense for anyone, we do not want to waste your money.

    I will be posting an update on the BrewDog blog shortly.

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  13. James, BrewDog22 October 2009 16:20

    My thoughts on some of the issues

    http://www.brewdog.com/blog-article.php?id=184

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  14. James, cheers for linking that in. Interesting to see more details. I am impressed. I hope it works out.

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  15. Hmmm. Obviously the publicity has worked as a lot of the beer on their site has sold out. Innovative brewing is all very well but if you can't actually buy the stuff?

    I've got a big party to cater for, so whoever is in charge, get the shop sorted!

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