Tuesday, 27 October 2015

Equity for Punks Revisited

Back in 2009 I became somewhat infatuated with a small but up-and-coming brewery called BrewDog. James Watt managed to capture my imagination with his promise of change within the beer industry. Personal circumstances conspired the night of the launch of Equity for Punks and I found myself with a maverick attitude. I parting with £230 for a 50p share in BrewDog. I forget the exact proportion of the equity up for sale, but whatever, I had bought a little bit of a brewery and at the time that cheered me up when other stuff was properly getting to me. I had been slowly getting tired of running a pub, and the drab "Real Ale" scene that felt like it was restricting progression of beer.

I spent the next few days, weeks even, justifying my purchase. Many people were very quick to point out that BrewDog had grossly overvalued themselves. However, I believed then, as I still do now, that the boys have a very powerful formula that was bound to find some sort of success; I wasn't purchasing their current value, I was buying into a promise of bigger things to come. If the bigger things didn't happen, at least I bought into a concept that was worthy, part of a change in the beer world that was needed, and possibly still is.

I only took brief notice of the second round of their crowd funding concept. It seemed by the valuation at the time that I might have doubled my money, but I really couldn't be bothered to do the sums. I had by that time moved Hardknott to its current location and my association with BrewDog seemed to me to be bringing me more embarrassment than benefits, so I decided to pipe-down and just get on with the job of growing my own brewery, even though there were times I overtly used similar tactics.

BrewDog became increasingly controversial, and annoyed more and more people, whilst at the same time creating such a buzz that the whole thing appeared unstoppable by nearly anything, even the most annoying PR stunt. I thought at least if they continue to grow the sceptical critiques would be proved wrong.

Equity for Punks 3 was at a time I was trying very hard to force Hardknott, and my own PR machine, to distance from BrewDog completely. I really have no idea what went on. I'm still unsure if the distance between us is good or bad, but equally, it became clear that BrewDog cared much less about me too.

What did happen, at some point in time, was that my single share was converted to 10 shares, each with a nominal value of 5p. The 5p shares seemed to be selling at that point for £95. My shares then seemed to be worth £950. Not a bad step up for the £230 I initially invested.

On looking, finally, at Equity for Punks 4 it became clear that this really had been a freight train that is quite unstoppable. The new shares are being sold at £47.5 each. BrewDog have raised over £10m already and are hoping to get to £25m in total.

When completed the new shares will be 1p shares. My 10 shares will also be converted into 1p shares and I'll have 50 of them. At least that is my understanding. My original investment of £230 seems to now be worth £2,375. A ten fold increase in 6 years. Of course, what it will mean if they fail to raise £25m I don't really know, but it still looks quite good from my point of view.

I was uncertain about writing this post. As I've indicated, I'm now in a place where I want Hardknott to succeed because we are who we are, not because we are someone who has simply copied off BrewDog. Equally, now that I have my own brewery, and BrewDog has grown beyond any projections even I would have believed, they are on the verge of being a multinational monolithic conglomerate they rail against. I've felt that there is now a tension between us that is barely tangible, but clearly we are viewed as a threat, rather than an ally. It's a shame, but not surprising I guess.

I console myself with the fact that whatever we do, and whatever our honesty in the way we operate, I have at least gained some growth in my investment with BrewDog. If we were to do the same, and go to the crowd for funding, we'd certainly not be as brash, audacious, or actually even slightly devious. The fact we don't lie to the banks, or our customers, or are quite as all out ballsy as those guys, and as a result are more content in making our own way might not bring us quite that same world domination. If we went to the crowd we'd probably be looking for people to support us because we are not going to be so controversial, but at the same time, we could not expect to make quite such dramatic gains.

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I did a number of posts around the time of the whole launch. It was, I have to admit, quite exciting. I have never regretted forking out £230, even if sometimes I did wonder if I would see the cash again. Check out the posts below.

http://hardknott.blogspot.co.uk/2009/10/dog-virus.html
http://hardknott.blogspot.co.uk/2009/10/dogs-share.html
http://hardknott.blogspot.co.uk/2009/10/punk-equity.html
http://hardknott.blogspot.co.uk/2009/10/doggy-style.html
http://hardknott.blogspot.co.uk/2009/10/getting-doggeared.html

4 comments:

Unknown said...

Of course, your shares are only worth £2,375 if you can sell them for that price.

Has anyone yet been able to do that?

Dave Bailey said...

Unknown,

Your point is of course completely pertinent and correct. I am not aware of anyone selling their shares independently. I believe some people have sold their shares via the official portal, and there is some dissatisfaction there. However, that information has come to me via third parties so would need confirming.

I think there is a chance that a proper floatation on any open market would see lower value. However, it seems clear to me that my shares would inevitably be worth more now than when I bought them. How much more is debatable, but at the end of the day, the boys have created a high growth model that is difficult to copy without it being very, very obvious indeed.

How big can they get before that growth collapses? - That is what anyone buying shares in the concept has to ask themselves. People asked the same question when I bought my shares. Compared to putting that investment in any normal low-risk investment I suspect I'll come out on-top.

If we had a crystal ball we would know all the answers.

Cooking Lager said...

You might find this a useful read

http://www.amazon.co.uk/Extraordinary-Popular-Delusions-Wordsworth-Reference/dp/1853263494

Dave Bailey said...

Yeah, I know Cookie, you've always been suspicious of their real value. But the point is the value of something is what people are prepared to pay for it. Enough people have paid enough money to certainly bring a huge value increase it would appear. I know that the value of my shares will only be achievable if and when I am able to sell them.

We'll just have to wait and see. My BrewDog shares are a high-risk section of my overall portfolio. But then, in the grand scheme of things, represent much less risk than I've taken pouring the majority of what I have into Hardknott.