Brewdog Bonds

Mike_1080

I was just wondering if the Brewdog BOnds currently being offered are something worth looking into As an investment? Any thoughts? They are being offered as 7.5% annual interest paid for 4 year fixed term. In the small print it doesn't look like it's covered by anyone so if something was to happen it doesn't look like they have to pay out but I could be wrong.
I know they also run their 'share' option which has not paid any dividends and where the owners say they won't be sellouts, so to me that makes no sense as if they don't sell then you'd not make anything. Can understand 1 share for AGM entry but can't see why more would be bought.

They also state turnover a lot but seems most profit goes into the company at the mo.

Any advice on the bonds would be great though.

Thanks

Gadfium

If you're happy to live with 100% capital loss then it could be worth a punt.
Personally, I'd consider it to be a form of gambling- you might win big or you might lose your stake. I certainly wouldn't be putting cash into a mini-bond that I needed.

The other (probably better) way to invest in this company would be to buy their beer. At least you are guaranteed some sort of return!

Masomnia

Gadfium wrote: »

The other (probably better) way to invest in this company would be to buy their beer. At least you are guaranteed some sort of return!

And much more ahem... liquid, than these bonds as it doesn't look like you can sell them or get out any cash for 4 years so if things do start to look a bit shaky for BD then there's nowt you can do but watch as you investment goes down the drain.

7.5% is a decent return in the current climate but it is certainly not without risks. You're right they're not covered.

The other thing is from the facebook posts about it there appear to be 6.5% bonds from last year, so I would worry that these would be subordinate to those, ie. if Brew Dog does get wound up then the holders of 6.5% bonds would get paid first and if there was anything left than the holders of 7.5%ers would get paid.

So weigh up the risks and see if it's worth it for you. I would strongly suggest that you don't invest anything you can't afford to lose.

I'm sceptical about issues like these because really if they can't borrow at cheaper than that or at that rate from a bank or on the open market, is that a cause for concern? More widely these are marketed at the general public who might not realise exactly what they're getting into and it feels a bit exploitative as they know people are looking for good rates which they are not getting from the banks.

Flobberchops

Minimum £500 is a bit rich for my blood. Maybe next year. I like the idea of supporting smallish independents though.

seacaitch

Unlisted retail mini-bonds seem largely aimed at inexperienced investors who would never normally consider buying individual corporate bonds at launch but who get drawn in by the novelty factor and who make the grave error of comparing the mini-bond to a savings account by focusing on the headline rate.

Few retail investors are probably in any position to assess the credit risk of the issuer and therefore have no means of determining whether the coupon rate is attractive or not. They probably also incorrectly price the risk presented by the total lack of liquidity due to there being no secondary market.

Conventional high yield bond portfolios would normally be broadly diversified holding many different bonds but it's likely that most retail investors buying mini-bonds have just a single or very few holdings, which is a very risky strategy.

In short, these issues seem to heavily favour the issuer, who by issuing to unsophisticated retail investors can get away with coupons far lower than they'd have to pay to entice professional investors better able to understand the risks being borne.

Personally, I wouldn't touch any unlisted retail mini-bonds with a barge pole. To me they all smell more like novelty gambling than the 'boring' long term investment plans that most people would do better to focus on.

Mike_1080

Thanks for all the replies. Just thought I'd look into the fixed things available at the mo. I was of the same opinion but good to know others feel the same. My portfolio is made of funds at the mo with interest seen on them over a short term of a 2-3years ranging from 1%, 9%, 16%, 25%, 27%, 43% etc so averaged out its way more than the proposal anyway and is something that can be researched properly before investment so I'll stick with what I know. Thanks everyone

Flobberchops

seacaitch wrote: »

Unlisted retail mini-bonds seem largely aimed at inexperienced investors who would never normally consider buying individual corporate bonds at launch but who get drawn in by the novelty factor and who make the grave error of comparing the mini-bond to a savings account by focusing on the headline rate.

At the risk of asking a very simple question, how would somebody best buy corporate bonds? Through a stockbroker or investment platform? Wouldn't there be fees involved?

MothballsWallet

Just as an aside, Brewdog are based in the town I grew up in - they bought (or rented) some more space on the industrial estate on the outskirts to expand their operations a couple of years ago.

bowlhead99

Flobberchops wrote: »

At the risk of asking a very simple question, how would somebody best buy corporate bonds? Through a stockbroker or investment platform?

If you want individual bonds or investment trusts holding bonds, the former. If you want open ended investment funds, the latter.

Wouldn't there be fees involved?

Unless you can find a broker /platform operator (and in the case of a managed fund or investment trust, a fund manager) who will work for free, then yes.