New BrewDog B Share issue

For some reason my blog statistics are showing it is being found using search terms like "BrewDog share price" and "BrewDog AGM" - That might be because I was the very first person to sign up to their "Ordinary B" shares and blogged about it. It might also have something to do with a new share issue by BrewDog.

I've decided not to extend my investment in BrewDog, I need all the money I have to invest in my own stainless steel. It does however enable me to look back at what my share has been doing. At first sight it doesn't look good. The new shares cost £95 for 4. I paid £230 for one. Hang on, what's going on?

Looking at 4.3.2 in the offer document tells us:

the existing issued share capital (following the re-classification referred above), being £51,609.50 divided into 100,298 "A‟ Ordinary Shares of £0.50 each and 2921 "B‟ Shares of £0.50 each, will be sub-divided into 1,002,980 "A‟ Ordinary Shares of £0.05 each and 29,210 "B‟ Shares of £0.05 each;

(Lets ignore what appears to be a typo in the glossary under "existing B share")

So, my one share gets divided into 10 each worth £23.75 - I've made £7.50 then as it would now cost me £237.50 to buy more of the same. The down side could be that I currently own 0.00097% of BrewDog, but because of the new share issue it will drop to 0.00089%. However, this should help the company grow still further. I'll have a slightly smaller share of a much bigger beast.

Since I invested in BrewDog the sales have increased by around 8 times. The current share issue price values the company at nearly £27m. Is that an appropriate value for a company that turns over £6.5m, looks like being able to make in excess of 10% profit on turnover and has net assets of £3.4m?

I don't know, I'm not an expert on these things, and perhaps the value is currently a little optimistic. If the plans work out, and so far I feel that everything promised (apart from my Equity for Punks password) has been more-or-less realised.

If the plan carries on with the same level of success that has already been achieved then a further 12 fold increase in the size of the business is possible. I've had people criticise me for calling my purchase of shares an investment; Call it what you want, I still see it as an investment and if I didn't need to invest in my own brewery I would certainly have considered buying more of BrewDog.

And it's far more than just looking for a financial return. I strongly believe there is a stagnation in the British brewing industry. Sure, there are many more breweries than there used to be, but many of them are putting out beer that could do with a lot more interest. We went out last night and the only decent beer we found was Stringers Victoria IPA, we should have patronised one of the pubs that serves Hardknott, I know, but we like a bit of variety. The rest of the beer we found was nothing more than micro-brewed beer made and sold to a price rather than quality and with very poor brand image. BrewDog is one of a number of breweries that are leading the British brewing scene away from stuffy, stagnation generating tradition and into the 21st century. Indeed, without BrewDog as an example, I doubt I'd have had the gumption to do what I have done with Hardknott. I also suspect that there are other breweries who have been similarly significantly inspired, even if they prefer not to be as overt about it as me.

Call it copying if you like, call it band-wagon jumping if it makes you feel better, or just view it as a realisation of where the real market expansion in beer lies. Beer revolution or just appealing to a potential market? it matters not when comercial success is important to keeping your brewery alive.

So, if you have some spare cash, why not buy some shares? you might lose the lot, but then, you could just keep your money in the hands of the bankers if you prefer.

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Another view on the subject is written by Neil and there is also the one from The Beer Monkey