Brewdog’s financial structure. More concerns..
Private Eye (1517) in February 2020 carried a lengthy analysis of the structure and finances of Brewdog. Private Eye doesn’t really do much on-line but a summary which is below
The piece is interesting because Brewdog is far from transparent about how it works despite its Equity for Punks ‘ownership’ scheme.
The nub of the Eye’s analysis is contained in these sentences
‘it is not suggested that any of these transactions are illegal or improper. The question is whether they are appropriate for a company with 100,000 other shareholders’
Of interest it notes that while a profit of £3.8m was made in 2016 this had reduced to £1.4m in 2017 and by 2018 had become a pre-tax loss of £576,000.
Brewdog have continued to expand since with more bars even during the pandemic and recent statements on its financial performance suggest that a move to canning beer has helped.
The Eye piece also noted:
When the private equity deal with TSG was announced in April 2017, it was stated to have involved a total of £213m, including £100m for new shares to fund Brewdog. The normal private equity playbook would look for an exit by sale or listing within five years
The Eye analysis focuses on a Company named JBW77 that appears to be linked to Brewdog founder James Watt and various holdings, transactions and deals that it has been involved in. As a union official that deals with very large companies (which Brewdog is not) I’m not sure there is anything hugely unusual about it.
The issue of course lies between how Brewdog markets itself, as a sort of rebel against the traditional beer industry, and the reality of the business it carries on which might well be described as traditional.
This has been highlighted again in the last few weeks by well documented issues about the very traditional, indeed almost Victorian, way Brewdog manages its employee relations.
Scotland on Sunday (20th June) has published a piece highlighting further concerns about Brewdog’s structure.
TSG are of course the main private equity investors in Brewdog. The Company is not publicly quoted so you cant buy shares directly on the market (the Equity for Punks schemes are crowdfunders) but can invest in equity via brokers.
Why TSG needs to have its holding in the Cayman Islands is not clear except obviously for potential tax issues. TSG is a significant equity investor across a wide range of companies and given that a TSG representative now chairs Brewdog this is at least a matter of concern.
On the other hand Brewdog might be excused for not knowing the details of other private investors (unless they courted them directly) since they might well have come via a third party.
Still it’s not very punk overall
Speculation about when Brewdog might launch on the Stock Exchange (an IPO) continues but the publicity of the last weeks suggests, perhaps not yet.
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