James' blog on Equity for Punks
Firstly apologies for putting what is primarily press material on the blog for the last couple of days. I much prefer doing the writing and giving people my own opinion but everything has just been so hectic this week with Equity for Punks. I just wanted to give some of my thoughts it and answer some of the questions that have been asked online in various blogs.
There have been 2 key numbers in Equity for Punks which have caused a lot of debate, these are the £230 minimum investment and the notional valuation we have put on the company.
The problem with making the individual shares cheaper is the huge transaction costs involved. If we had, as many people suggested we should, 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. However up to 4 people can apply for one share, meaning that you can club together with a few friends and invest just over £50 each.
The other contentious issue has been the notional valuation of the company, with many people having issues with the £25m valuation this puts on BrewDog. Any valuation of a company is both notional and subjective; here is the rationale for ours.
Our turnover in 2008 (our first full year trading) was £0.8m with £0.1m profit, in 2009 turnover will be over £1.8m. We currently re-invest all profit to grow the business. To speak about valuation in terms of profit multiplication is misleading, multiples to profit is irrelevant in a young fast growing company. Sometimes companies are floated for tens of millions without ever having traded, with no turnover and no profits. With investments like this you are basically valuing the brand, its growth potential and the ability of the people behind it.
Keith Greggor and Tony Foglio, 2 very shrewd and experienced drinks business investors, valued BrewDog at £5m in June and invested at that level. The increase in the valuation of the company since then is because:
- We have doubled our production capacity since then with the addition of new fermentation tanks and a new 40HL brew-house
- The land we purchased in July will be worth approximately £4m once planning is granted (this is currently not shown on the balance sheet)
- The value Keith and Tony add is phenomenal. These are 2 real life Dragons. They built Skyy Vodka into a billion dollar brand and have done similar things in the US with Malibu and Bailey’s. Their experience, contacts, backing and knowledge will be invaluable to BrewDog.
- Since June we have also nailed new national listings with Tesco and Sainsbury’s and signed several high volume export deals.
- We have also taken over a bar in Aberdeen. Investors will also own a share of the BrewDog bar! We intend to open several BrewDog bars in the near future.
- In addition we have set up a US Company (BrewDog USA LLC) to handle sales and marketing in the US. Equity for Punks investors will also own part of this company.
- The 20% lifetime discount also drastically reduces the ‘notional value’ of £25m. If you buy a case of beer per month (at a cost of £30) you will have made your entire investment back in 3 years, a 100% return.
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. In addition you get to own a piece of the amazing eco-brewery we will build with the money raised. Part of the notional valuation is based on what the £2.3m raised will instantly turn our business into. We already own the land and want you to own part of the finished brewery with us. The value is readily possible with the realisation of the investment money.
I guess the question to ask yourself before investing is do you believe in the brand and the people behind it? Do you believe BrewDog has the potential to continue growing? Keith and Tony have a huge history of insane success (they built Skyy Vodka to a billion dollar brand), the BrewDog is already internationally recognised and Martin and I are completely committed and dedicated to the future of the business.
Our sales growth so far has been phenomenal. With that growth all set to continue we want you to share in our future sucess and own your very own part of BrewDog.
What could be cooler than owning part of your own brewery and drinking your own beer?
This is going to be an awesome journey, we want to take you with us on it.
Email me if you have any questions [email protected]
James, BrewDog www.equityforpunks.com