Camden Town raised roughly £2.75m on Crowdcube in July this year, overshooting its stated target by £1.25m. 5.37% of the company was thus acquired by Crowdcube investors, at a valuation of £50m. Barely 6 months later, Camden Town has been bought out by AB InBev at a valuation of around £86m – representing both a significant value uplift, and only the second exit to have been delivered by the UK’s equity crowdfunding sector to date. The first came in July, when former Crowdcube fundraiser E-Car Club was sold to Europcar.
But exactly how much profit do Crowdcube investors stand to make? AltFi Data has deduced that the crowd paid a price of 64.667p per share for participation in July’s Camden Town fundraise. AB InBev is purchasing the entirety of the shares in issue at a price of £1.0861 per share – in effect, a 67% upswing in just 6 months. A detailed letter to shareholders (/“Hells raisers”) from Camden Founder and CEO Jasper Cuppaidge details exactly the options that are now available to Crowdcube investors. Without digging too deep into the specifics, shareholders have the option of liquidating the entirety of their shareholdings at the price of £1.0861 per share, or of partially delaying payment. In any case, the “Present Value” will likely be equal to £1.0861 per share (discounted back to a present value at a generous 8.05%).
When Camden Town raised money on Crowdcube, both A and B shares were up for sale. The price on an A share was a minimum of £25,000. Cause for concern? Apparently not. As Cuppaidge explains:
“You are being offered the same terms regardless of the class of shares that you hold; A Ordinary Shareholders and B Investment Shareholders are being offered the same terms.”
We appear to be looking at an instance of substantial profit, turned around in a startlingly short space of time, and shared between all classes of shareholder. An impressive case study that will doubtless be pointed to for years to come.
A few things to note, however. Those investors that bought into Camden via the Crowdcube round in July had no say whatsoever in whether or not to accept the terms of the AB InBev sale. Camden’s Articles of Association state that where shareholders who collectively own 75% of the company or more are willing to sell their shares, the remaining shareholders may be required to follow suit – selling their shares to the same buyer – what is known in industry parlance as "drag along". That is exactly what has happened in the AB InBev buyout. Shareholders representing over 90% of Camden’s share capital agreed to accept the AB InBev offer, and thus the crowd’s hand has been forced.
There’s another intriguing snag here. HMRC’s guidance on the Enterprise Investment Scheme (EIS) states that a company that is under the control of another company cannot be eligible for EIS relief. Is it therefore possible that Crowdcube investors in the Camden round will see their EIS relief withdrawn? We reached out to Gillian Roche-Saunders at specialist consultancy firm Bovill for answers:
“A return on investment within 6 months is a fantastic result for investors in Camden Brewery. EIS relief shouldn’t be the sole purpose of an investment but for anyone who was hoping for the 30% income tax reduction, that is only available when it takes at least 3 years to sell the shares.”
Recall also that the Camden round on Crowdcube was the subject of some controversy in April, when a 20% stake in the business was sold to a Belgian manufacturing family for £10m. This transaction valued the company at £50m – significantly lower than the £75m price tag that the Crowdcube campaign had originally carried. The Crowdcube round’s valuation was subsequently revised down to £50m, but naysayers pointed to this as a prime example of how easy it is to fleece the crowd.
“This deal is great news for investors in Camden Town Brewery and further vindication that the crowd is a shrewd judge of investment potential. Camden's pitch prompted widespread discussion with some finance experts being publicly disparaging of the company's valuation. I expect those detractors will be choking on their Christmas turkey following the news of Camden’s sale within 12 months and the reported multiple return to investors. Christmas has come early for the Hells Raiser investors in Camden.”
Crowdcube is enjoying a strong finish to the year. With over £110m in cumulative equity funding to UK companies facilitated, the platform is now beginning to see encouraging signs from its still nascent portfolio. Only last week, we learnt that EasyProperty, another Crowdcube alumnus, had secured a significant up-round – and that an IPO may be just around the corner.
Of course, to attain a worthwhile perspective on the equity crowdfunding space, one needs to consider all of the facts. Those facts include failures, as well as a few successes, and we believe that platforms ought to present these facts in full to prospective investors – as an essential component of price discovery. Our “Where are they now?” equity crowdfunding report published in November sought to ascertain the status of every company that has ever raised equity money from the crowd. The headline finding – that 4 out of every 5 equity crowdfunded companies are still trading – surprised many. Admittedly, AltFi Data knows of several crowdfunded companies that have closed their doors since the publishing of that report. But instances of return, though thus far rare, may also surprise. Can the equity crowdfunding sector go on to exceed expectations?