Saturday, May 25, 2024

Investment Opportunities Brewing: Could a BrewDog IPO Represent a Buy for Investors?

BrewDog has become a cult hit as a brand in a relatively short period of time. Founded in 2007 in Scotland, the company’s Punk IPA product has been so successful that it’s become the UK’s third-largest ale brand, whilst BrewDog’s range of larger has also proved wildly popular among consumers. Recently, the brand has been weighing up an IPO, but following a turbulent year for London Stock Exchange listings, would a BrewDog floatation represent a buy opportunity for investors? 

It may be indicative of the current IPO climate that BrewDog shelved its plans for an imminent listing. The company’s advisors and banks highlighted the unpredictability of the ongoing Covid-19 pandemic as a leading concern ahead of a prospective 2021 listing. “Could it be some time in 2022? Maybe. 23? Maybe,” founder James Watt told The Telegraph in October 2021.

October 2021 also saw one of the London Stock Exchange’s most promising listings, cybersecurity firm Darktrace, begin a freefall that led to the company shedding more than 50% of its stock value in a little over a month. With this in mind, the listing of a popular domestic startup like BrewDog is perhaps exactly what London’s been looking for to transform its image into a modern forward-thinking exchange. 

But what exactly could investors expect from a potential BrewDog IPO? And could it breathe life into London’s IPO prospects? 

Analysing What a BrewDog IPO Could Look Like 

Despite the lasting impact of Covid-19 on the hospitality industry, BrewDog became profitable in 2020, recording a pre-tax profit in 2020 of £1.1 million. Furthermore, the company grew its revenue to £214.9 million during the same period, up from £171.6 million in 2019 – according to the company’s accounts. 

James Watt called 2020 the company’s ‘biggest year to date’ in terms of profit, as BrewDog opened a brewing facility in Berlin and its 100th craft beer venue in Dublin. Whilst the company makes much of its money through product sales, BrewDog also has a range of bars and hotels through which it generates revenue. 

Through the first half of 2020, BrewDog recorded losses of £9.2 million owing to the pandemic’s impact on the hospitality sector, making the company’s wider performance even more impressive. 

Although it’s been confirmed that BrewDog will wait a little longer to scope out hospitality recovers from the pandemic in 2022 before deciding to opt for an IPO, investors can also look to the recovery of the industry as an indicator over whether a BrewDog listing will be able to successfully transfer its cult popularity into purchase intent on the stock market. 

BrewDog is a fully-fledged international company with breweries ranging from Brisbane, Australia to Ohio, USA, but the company’s Scottish roots indicate that a listing on the London Stock Exchange is most likely when BrewDog finally readies itself for a floatation. 

Following 2021’s disappointing debuts of Deliveroo and Darktrace, an upcoming listing for the ever-popular BrewDog may be the break that London’s been waiting for all along.

Prosperous Outlook for LSE

Following the initial public offering boom of 2020 and 2021, there have been widespread efforts to reinvent the London Stock Exchange as an appealing place for companies to launch IPOs. Throughout 2021, new rules were continually introduced as a means of clearing the path to launch IPOs on the LSE – including a revamp of dual-class share structures and minimum market capitalisation boundaries. 

However, in a post-Brexit landscape, London is still searching for more fruitful use cases to prove that the FTSE can compete with the rest of the world. 

As the past year’s performance of the FTSE 100 shows, the leading companies on the London Stock Exchange have performed generally well in the wake of the Covid-19 pandemic. Whilst 2021 wasn’t quite the landmark year that the city was hoping for, BrewDog stands as just one of a range of modern, forward-thinking startups that are set to IPO in the coming months. 

Maxim Manturov, head of investment advice at Freedom Finance Europe, says that “Officials say the company cancelled its IPO because of the pandemic, but they also note the scandals surrounding the company amid employee discrimination and conflict with buyers. 

There is now a negative backdrop around the company due to employee departures, for example, the company hired people from the likes of Red Bull, Suntory Beverage & Food and Just Eat to go public, but many of them left the company after a few months. Such a situation could have a negative impact on the company itself, also scaring off investors. Also worth mentioning is the pandemic, which has had a negative impact on the company’s revenue and the company has suffered losses due to bar closures.  

Given the current situation, when looking at this company, it is important to assess how quickly it emerges from the crisis amid the scandals and the pandemic. According to anecdotal evidence, the company expects a valuation of £2bn and it is important for the company to show positive recovery momentum and news background to get this valuation.”

With other startups like The Hut Group Beauty and Raspberry Pi also set to launch IPOs on the London Stock Exchange in 2022, it’s likely that London’s fortunes in welcoming interest from around the world for prospective listings may begin to change. 

BrewDog’s long-awaited IPO may happen in 2022 depending on the hospitality industry’s recovery from the ongoing Covid-19 pandemic. But it’s becoming increasingly clear that its eventual listing may be just as beneficial to the fortunes of the London Stock Exchange as it is to the brewers themselves. 

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