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The article says: In 2017 a US equity firm TSG Consumer Partners acquired a 22% stake in Brewdog. But unlike the Equity for Punks' "ordinary" shareholders, T
by rahimnathwani 8mo ago
The article says:
In 2017 a US equity firm TSG Consumer Partners acquired a 22% stake in Brewdog. But unlike the Equity for Punks' "ordinary" shareholders, TSG was given "preference shares". That meant that if Brewdog was sold, TSG was first in the queue to get back its investment plus any return owed, possibly leaving little or nothing for small investors.
It seems the preference shares weren't just 1x liquidation preferences. The 'plus any return owed' was 18% per year if, as I imagine, those shares are the 'C Preferred Shares' described in Brewdog's Companies House filing on 7 Jun 2017. ("Statement of capital following an allotment of shares on 6 April 2017"):
5 Statement of capital (prescribed particulars of rights attached to shares)
Class of share
Preferred C Shares
Prescribed particulars
Amount") shall be applied as follows:
1. an amount shall be distributed among the holders of the Preferred 'C' Ordinary Shares which shall be the greater of:
a) the Deemed Acquired Price of all Preferred 'C' Ordinary Shares together with, in respect of each Preferred 'C' Ordinary Share an amount equal to 18 per cent of the Deemed Acquired Price per year (based on a 365 day year) accruing daily and compounding annually from the date of issue up to and including the date of the return of capital; and
b) such amount of the Distribution Amount as would be applied to the holders of the Preferred 'C' Ordinary Shares if they ranked pari passu with 'A' Ordinary Shares and 'B' Ordinary Shares; and
2. any balance of the Distribution Amount following the application of the amount referred to in (1) above shall be applied to the holders of the 'A' Ordinary Shares and the 'B' Ordinary Shares (in accordance with the terms of the Articles of Association), provided that in the instance that Article 6.2.1(a) applies, the Warrant Shares shall have nil value for the purposes of Article 6.2.2.
Any return on Preferred 'C' Shares shall be made amongst their holders pro rata as nearly as possible to their respective holdings of Shares of that class.
This may seem like a lot, but it's a common structure for private equity deals, and we have no way of knowing whether that's the best deal that Brewdog's management could have struck at the time.
- x0x0 8mo agoI think you are mistaken. The pages are split -- see that closed quote and parenthesis. That quote is a continuation from pdf page 3, which has the opening parenthesis. Each of the cells for classes A, B, C overflow onto one page (each) that follows. So the C holders are entitled to a distribution on sale or repurchase, but not an annual distribution. > The Preferred 'C' Shares are entitled to receive dividends (and shall rank equally with the 'A' Ordinary Shares and 'B' Ordinary Shares). On a return of the entire capital of the Company or a winding up (other than a redemption of Shares or the purchase by the Company of its own Shares), the surplus assets of the Company available for distribution among the members (the "Distribution ... which leads into your quote above. Frustratingly, it seems to be impossible to link these pdfs directly.
- rahimnathwani 8mo agoI didn't say it was an annual distribution. I was quantifying the 'plus any return owed' in the original article. In a sale, the C holders get the greater of: A) a % of proceeds as if all shares were ordinary shares, or B) what they paid the company for their shares PLUS 18% per annum accrued interest. So if the company were sold 9 years after they invested X, and the sale proceeds were less than 4X, the C shareholders would get 100% of the proceeds, the ordinary shareholders would get nothing.
- x0x0 8mo ago> I didn't say it was an annual distribution. You're quite right, I misread your post. Gonna learn to read one today, but clearly not today.