This happened back earlier this year but I didn’t post at the time. On the face of it, my beer shares dropped by about 75% in “value” in one day. No wonder I didn’t want to write about it…
Keen readers will remember that I hold a number of shares in a popular beer company. I originally invested in 2011 at a price of about 50p per share. I sold in 2016 almost half of my holding for £4.75 a share and was looking to sell more but hadn’t been able to since.
I wrote a Post about why you shouldn’t count your kegs before they brew. I should have listened to my own advice. And I wrote and older post here probably best thought of as a warning on the how paper valuations on illiquid assets are meaningless.
Anyway, this neer company was new and fresh back many, many years ago. I used to like drinking the beer and in their pubs but soon came to realise that the fans of the beer were total as*holes who were sort of snobs / purists / “before it was cool” types. I started drinking only Belgian beer and fell out of favour with this carbonated crusade against blandness.
The beer company grew and grew and grew and never paid a penny back to investors. Questionable business dealings and the two bosses became rich (and partially cashed out to the tune of millions!) while more investors money was sucked in – first the smart money (mine at a £26m valuation) and latterly stupid money (at a billion £ valulation).
All the while, I kept my shares, updated their “value” in my portfolio each month and didn’t think much about it, but hoped I could sell out for a good price one day.
Somewhere along the way, COVID hit – giving a good excuse for bad running of a company, along with a lot of bad press.
In August there was a trading day and there was much speculation about where the price would land. At the last trading day they went for £15 but you could recently buy shares at £25 a pop – albeit with some discounts and what not – and I’d valued my shares at £20 each.
In the end, they traded at a price of £6.50 a share. SIX BLOODY FIFTY!!! which wipes about two thirds of my paper profits. It’s quite a climb down and does not bode well for the company which has been planning to IPO next year (for the last decade).
I’ve done well from the investment – but I’d have been better selling at £4.75 six years ago – based on my calculated performance I’d have turned that money into about £10 per share instead of a pathetic £6.50.
The market closed on the 1st of September so the 5-figure drop in value isn’t in my September month-end – otherwise it’s been a shitty month!
The only bright point is that it’s only a 1.5% headache now – the price has dropped and I don’t have time to worry about little things like that.
Bad to Worse
The auction appears to have been really badly run – the pricing and information seemed to favour buyers and the paltry value of shares traded made me concerned that this high growth company (10 years ago) is not as valuable as it thinks itself to be. £6.50 a share is either a fair price or an abosolute bargain – but given the lack of a big investor dipping their toe, it’s hard to know what the company is worth.
The company continues to have bog spending plans including buying up half of the Highlands to plant trees. At hhe same time,.bars are closing and profits are hard to see increasing given how everyone is broke and their bills are going up.
The Lady has rightly been telling me that she told me so – boasting about imaginary profits in an illiquid investment is foolhardy – but my hope is that the trading day (where only about £250,000 of shares traded and only the lowest 10% of shares put up for sale were sold) doesn’t reflect the actual value in the company.
I never truly believed that the value of my shares was mine – only after exit. But I did add it to my net worth and it gave me a false sense of confidence and attractiveness that accompanies a few beers.
At £6.50, I would be tempted to buy more but I don’t think that I need the extra risk. But it’s a big discount on what you were paying recently – and the price that they were selling shares was justified by someone at some point?
I might have even bought more at the time but didn’t have the money (or balls).
But I don’t even like the beer that much – it’s good for the style of beer but the Lady and I are largely Belgian Beer only – messing around with IPAs is not to our tastes. I’m not really into drinking in pubs anymore either. I also don’t really like the bars as the attitude from the people there is obnoxious – if you know what I mean, you’ll know what I mean.
It goes to show that you shouldn’t put too much faith in one investment alone (eggs and baskets) and that liquidity is very important (the ability to sell when needed and not a 20% discount in bars and their online shop).
Where will the price go from here? I don’t really know or care that much. By selling back in 2016, I’ve got 4 times the money I put in – so I’m up on the investment. The remaining shares can either go to the moon or down the drain. I’d like to sell, but their mythical IPO is always just going to be sometime next year and dividends – who knows.