Brewdog – A Pint Half Full Or Half Empty?

Some of the biggest businesses are built on a foundation of dodgy dealings – and the brewer asking drinkers to dip into their pockets for Britain’s largest crowdfunding pitch is no stranger to controversy.

Brewdog, the craft beer sensation based in Scotland, is seeking £25 million to expand the business and roll out new brews.

But the risks might be a little bitter rather than mild for some investors.

Founders James Watt and Martin Dickie admit they lied to a bank to get their hands on a £150,000 loan a few years ago.

Since then, they have raised more crowdfunding cash, but this time wants to shatter the world record for an equity deal.

But the offer values each share at a staggering £47.50 – and the issue of 526,316 will considerably dilute ownership.

Stellar valuation

The offer values the firm at £283, which is a nearly 10 times annual turnover and 70 times last year’s profits before tax. The valuation is stellar by any standards and investors need to remove their beer goggles and consider the financials long and hard before making an investment decision.

Clearly, to buy the minimum two shares for £95, investors have to be true believers in Brewdog as a concept and Dickie and Watt as executives.

They also have to believe the market to support the valuation is out there and this is the company that is going to grab a share as competitors try to repeat the success with their own beers.

If the firm fails, investors could lose all their cash.

OK, shareholders get some perks – up to a 10% discount t in Brewdog bars and up to 20% sliced off online purchases. They can also expect £10 of beer bucks to spend and a free birthday beer each year.

Bar too high?

The crowdfunding appeal hits an interesting spot in the market.

Brewdog’s success is built on reputation and loyalty of thousands of small investors, but such a large funding target requires some bigger hitters to step up to the plate as well.

The worries for these investors are Brewdog is an unquoted company, so trading shares is not easy and the company has a history of not paying dividends.

For sophisticated investors, the lure is growth in share value and income – Brewdog offers neither. The pitch is really an appeal for members to join their club.

Shares are not on offer on any crowdfunding platform, but through the Brewdog web site.

The question is has Brewdog raised the crowdfunding bar too high?

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