Everyone was happy, sort of, except the public that bought the misbegotten shares and got wiped out?
By Wolf Richter for WOLF STREET.
Vintage Wine Estates along with its subsidiaries – once a PE-firm-backed roll-up with about 34 brands and estates that had gone public via merger with a SPAC in June 2021 at a $690 million valuation, and a market capitalization on its third day of trading of $776 million – has now filed for Chapter 11 bankruptcy. It took three years and one month from the SPAC merger.
The company is said to be the 15th largest wine producer in the US with 2 million cases a year spread across its brands. At its peak year, in 2022, the company had $294 million in revenues. The wine brands will come out of this bankruptcy process under different ownership. The public shareholders are just out of luck.
In September 2022, by which time the shares had already lost over half their value, just 15 months after the SPAC merger, the company reported a surprise $27-million operating loss for the quarter, including a $19-million inventory adjustment, topped off by a skimpy forecast. Its shares [VWE] kathoomphed 40% on the spot.
Layoffs started in 2023. By June 2023, just two years after the SPAC merger, shares traded below $1. Today, they’re at $0.07.
SPACs have been falling like flies since 2022, as one of the greatest Wall Street scams – the SPAC bubble – imploded. They’re now densely crowded on the cheap floor of our pantheon of Imploded Stocks. It was an easy way during the crazy times of free money to dump shares into the lap of the public at ridiculous valuations without the disclosure requirements of a classic IPO.
The way it worked: An already publicly traded Special Purpose Acquisition Company (SPAC), a blank-check company with a cash balance and nothing else, merged with a target company, such as Vintage Wine Estates, which thereby became publicly traded. And what the public got with Vintage Wine Estates was this (data via YCharts):
As of its last quarterly financial statement through March 31, 2024, the company had $352 million in short and long-term debt, the result of the debt-funded roll-up of other wineries. Revenues in the quarter collapsed by 35% year-over-year. Why do companies go bankrupt? Because they have too much debt. Something goes wrong, and then the debt can kill them.
The company could no longer service its debt. In early May 2024, it was able to extend the forbearance period on its debt to June 4. The lender group also agreed to defer the $10 million principal payment that was due on May 15, to June 17. And then it ran out of wriggle room.
As part of the bankruptcy proceedings of Vintage Wine and its subsidiaries, the company will attempt to sell its assets to “address its debt obligations,” the press release said. During that process, it “expects its commercial operations to continue largely business-as-usual and is committed to serving a diverse range of customers during the Chapter 11 Cases.”
For funding to get it through the bankruptcy process, Vintage is seeking court approval for $60.5 million Debtor in Possession (DIP) financing.
Vintage Wine Estates was founded in 2008 when Pat Roney, owner of Girard Winery in Napa Valley, acquired, as it said, the “wine industry’s first direct-to-consumer brand,” Windsor Vineyards in Sonoma – both in the Bay Area’s Wine Country – and then went on an acquisition spree of brands and estates.
In 2018, PE firm AGR Partners led a $75 million investment in Vintage to expand the roll-up of wineries. “We are excited to partner with Pat Roney and the Vintage Wine Estates team to support their growth plans,” AGR Partners said at the time. “We look to make long-term investments to support best in class businesses with great partners; our investment in Vintage Wine Estates aligns closely with this goal.”
AGR exited the company as part of the SPAC merger in 2021, at peak valuation, likely with a massive profit. So kudos. Insiders likely also made a bunch of money as part of the SPAC merger and afterwards selling the shares. Wall Street investment banks and law firms certainly made a ton on fees. The founders of Bespoke Capital Acquisition Corp., the SPAC that merged with Vintage, also made a bunch of money. Everyone was happy, sort of, except the public that bought the misbegotten shares?
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Why were they expanding inane brands at all different high-price labels that nobody ever heard of towards the end?
I’ve heard of them. Love B.R. Cohn, although I’ve only bought wine at their vineyard. Buried Cane is Anthony’s (PNW seafood chain) house Chardonnay. It’s very good, lightly oaked, and no or maybe partial malolactic. Comparable to the B.C. Okanogan Chardonnays in my opinion.
Wine is wine is wine. It’s just old crushed grape juice gone bad. Whatever happened to Trader Joe’s 2 Buck Chuck?
Two Buck Chuck was the result of taking advantage of a situation much like this. When the semiconductor business crashed a lot of the capitol for those business owners had been invested in wine, and it was a year when there was a major excess of available juice (bountiful harvest).
Unfortunately the money that kept those folks at the vineyards paid dried up, and the grape growers and those who had wine in the vat, couldn’t find the customers they’d had before, because those folks where getting fired or trying to save the jobs that actually paid them.
You could easily buy wine in Napa for 1/0th the retail cost if you knew where to look and had cash. Vintners were actually paying their employees with wine instead of cash, and those employees needed cash to pay their bills.
The wine buyers for TJ’s had access to cash and a market, and they were bottling grape juice from guys who would normally sell at >40/bottle and selling it really cheap with the provision that they couldn’t say who the actual vintner was. There used to be some incredible deals.
I can’t say for sure, but I have a strong suspicion that the huge excess harvest in Portugal and France the last two years ended up in “generic” labels, as that would be more profitable than those countries gov’t programs to buy the excess production and use it for vinegar to prop up the prices.
Revealing only your ignorance of wine SCBD.
While I cannot and do not claim any of the very obvious discretion and very clear tasting expertise of some,,,
I can and do exert my feeble taste buds to differentiate between ”plonk”,,, MDA,,, Thunderbird,,, and the very wonderful products of “Wine Country USA”
This reminds me of when a beloved mentor invited me to a wine tasting where the most delicious one was something from France years earlier,,, maybe a ’64??? Have read that wine cost $$$ years later… Who Knew, but the seed was sown…
TRY and get over it SCBD, and go and taste as many of the wonderful wines of Napa, etc., to get over your lack of knowledge between plonk and at least average.
SCBD – it never left, but it became ‘Three-Buck’ (purchased their Pinot Gris by the case for my late, resident MIL (passed @ the century mark Sep. last) for a decade…).
may we all find a better day.
All wine of any sort tastes like dirty water or just horribly stinky spoiled grape juice and is useful for anything only if you are out of white vinegar to clean stains from glassware.
It costs $5 these days.
Inflation something.
Check out Trader Jose Chilean wine. . .
What’s the word? Thunderbird, What’s the price? fifty twice.
How do we know that isn’t all copied out of the magazines on your coffee table?
Name Asti Vineyards best seller..or just one….it was just up the road from Windsor Vineyards after it was built.
Oh, that was to jr……
And Windsor was the newcomer to wine country then….73-4 or so…..Asti had well established proven root stock. My mom and her friends enjoyed their products in early 60’s…….famous Italian brothers…long heritage in CA…..never SPAC crapp.
NBay – those of a certain age will also remember Italian-Swiss Colony’s “…little old winemaker, me!…”, followed by Presidential candidate Pat Paulsen’s stewardship of the Asti grounds…Best.
may we all find a better day.
Windsor Vineyards??? I know those guys!
This is FUNNY!
That’s the best name drop you’ve got? Not even ONE Senator or just plain old congressman? How about only one famous General?….or some famous Field Grade? Any C suiters from a top 500 corp?
And why is that so “funny”…..I’m kinda confused…..or senile…not much difference anymore.
Maybe they need wine labels called “Debtor,” or “Ripped Off,” or “Chapter 11” in the spirit of tasteless branding of The Prisoner Winery.
Perhaps a lovely Kathoompth Sauvignon, or a Fraudonnay?
Love your creative labels, and I hope at least one of the wineries picks it up!
Looks like the Winos are out at full force. Actually I think the only Winos left are women, don’t know of any guys who drink a box of the stuff nightly.
Offended at the word “wino” the “W” word. It’s ok I’m a wino too, my t-shirt says “I’m a wino”.
Now if you’re a derelict who lives under the bridge drinking boone’s farm … not good.
@Home Toad in college we would pour a bottle of (low cost high alcohol) “Boone’s Farm” into a pitcher with some 7-up and a cut up orange and tell the girls is was “Spanish Sangria”…
AptI- cue the late Jerry Jeff Walker’s ‘Sangria Wine’ (became familiar with that mix when in TX in the early ’70’s…).
may we all find a better day.
Boones farm was only 10% and never came in gallons. Not a bad wine. other than that.
Sure is a lot of phony wine lovers here.
Does one drink for taste or effect?
Who came up with that stupid line?
Indeed.
Pruno?
I have enjoyed that wine….best served at room temp and metal cups….very sensitive stuff, it’s even kept totally hidden from the non-afficionados.
From Girard Winery- “A wine from the often neglected Petit Sarah variety. The nose and taste are dominated by fruity notes of black and blue berries…”
My impression based on a very limited knowledge of SPAC mergers is that they are by nature speculative. But researching the entities Wolf provided in the Vintage Wine narrative shows some of the principals are experienced executives. As an investor in the newly formed Vintage Winery what was not to like? From an online bio., Paul Walsh the CEO of Canadian, Bespoke Capital Acquisition Corp (BCAC) had been CEO of Diageo and before that Chairman and President of Pillsbury among other positions, and again from the bio was a nonexecutive director of McDonalds. What went wrong? Mr. Roney was replaced as CEO of by then failing Vintage by Mr. Seth Kaufman in October 2023. Prior to this Mr. Kaufman was President and CEO of Moet Hennessy North America.
A good read that includes how California wine estates actually prospered during prohibition is Last Call: The Rise and Fall of Prohibition by Daniel Okrent.
It’s hard to believe that executives with those credentials could have stepped into what they did without some ulterior motive. But I happen to know two street-smart, wealthy, accomplished entrepreneurs who took an expensive, very expensive, flying leap into a totally idiotic and long-shot investment.
They’re trying to get what they can through bankruptcy.
Stuff happens.
Happens in all industries. Top executives at large, established companies are not skilled in actually running a business. They are skilled at self-promotion and overseeing a large bureaucracy. When these executives are put in new entrepreneurial companies, they fail miserably. Think of PepsiCo President John Sculley going to Apple. Over the past decade, you can witness this in biotechs. The VCs hire star power executives for their companies in order sell shares not to run the company.
Apple’s sales increased tenfold during the reign of Sculley.
The guy (Johnston?) who came from Apple to run JC Penny ran it into the ground in short time.
@Earl thanks for the book recomendation I have not read that one. I bet I have read over 50 books about the wine industry in CA and if I had to recomend just one it would be “Napa: The Story of an American Eden” published in 2002 (available used on Amazon starting at just under $2).
Rollup:
transitive verb
: to increase or acquire by successive accumulations : accumulate
rolled up a large majority
intransitive verb
: to become larger by successive accumulations
“Finacialization” – The increasing number of useless paper-pushing greedy asshole middlemen that continue to insert themselves between the productive people actually providing a valuable service (like wine, a place to live, or healthcare) and the customer and extract pounds of flesh.
50+ fucking years of continued socialization of private losses has consequences, as Wolf continues to document. Somehow all these CEO’s and CFO’s and upper management teams never lose any of their wealth and assets, while the rest of us, but especially the taxpayer sees their purchasing power and expendable income destroyed. Eventually, the financial sector will face the guillotine, so to speak. Can’t come soon enough, if you ask me.
+100
Well said. The only way to win the game is to not play. T-bill and chill for the moment and wait for a crash, it’s our only hope. Maybe not this year but in the possibly in the ones to come.
Here, here! It’s about time we exorcise these ‘money for nothing’ vultures.
I made fine wine for years. It was a big deal. Ordered in Pinot grapes from Oregon, Zin from California, had the press, oak barrels for aging, etc etc. Then the climate disruptions began and grape supplies were more iffy every year, starting at least 15 years ago!!! Good grapes make good wine, pure and simple. Anyone that would invest in vineyards and their products weren’t using their heads. Insanity. When you see entire grape growing regions wiped out by fires, drought, or sudden spring freezes there is no way this investment was anything beyond emotional hopium. It’s about as smart as investing in Russia because you like Russian borscht.
Spot on. We made Merlot for several years with fabulous grapes from a tiny vineyard in E. WA. When the owner retired and sold out to a local winemaker we tried a couple other sources with less than stellar results and finally stopped altogether.
Borsh is Ukrainian. The only thing that is native to russia is alcoholism.
The problem is they have $352mm in debt and only $280mm in annual revenue. How are they supposed to service that much debt with so little revenue? It would be like a guy making $60K a year borrowing $125K to buy a Porsche 911
The secret to these and a lot of overleveraged companies is where the debt goes. Many times, it’s paying back the initial investors and PE firms huge multiples on their capital … 3, 5, 7, 10 times their investment.
The company is left with huge debt to service and these guys move on to the next deal loaded with cash from the suckers.
When the companies go under, hapless stockholders get wiped out, debtholders take a haircut and new PE players come in to refinance and get their pound of flesh up front from the fresh debt offering and/or IPO. It happens over and over.
Well said. As always the business is the sale of the stock. In this case the wine is is a byproduct/bonus.
This is why – with only a small number of exceptions – I don’t buy individual stocks. In almost every case my investments dropped like rocks. Making me the sole cause of a bad bear 🐻 market. 🤪
A few times we bought 100 shares of companies because someone we knew was appointed to some high management position. We then sent them emails saying … “not to add any pressure … but 100% of our retirement was now reliant on their performance.” Yuk. Yuk. Yuk.
Actually … for our retirement financing we only buy broad based mutual funds.
And, more to the point, I only buy wine that tastes good to us. Mostly very cheap stuff.
We didn’t like the taste of 2 buck chuck. Go figure.
Have you ever seen Charles Shaw or heard him talk about things?? Made a fortune, though.
It’s still at Trader Joe’s at $3 as Bronco Wine or similar.
Have any SPAS’s turned into good long term investments? The only winners appear to be those packaging and selling them.
I was wondering the same thing. Reading about all the failures is getting depressing.
“SPACs have been falling like flies since 2022, as one of the greatest Wall Street scams – the SPAC bubble – imploded.”
“AGR exited the company as part of the SPAC merger in 2021, at peak valuation, likely with a massive profit. So kudos.”
Wolf, why kudos for running a scam and defrauding the public? I know that the people who ran after quick money were greedy and gullible – and they learned their lesson the hard way. But fraud is fraud.
sarc?
Old wine joke in Oregon. how do you make a million $ in the wine business? ——-Start with 2 million.
The California version has always been “How do you make a small fortune in the wine business?——–Start with a large fortune.
The wne business has a lot in common with the real estate development business in that few people without deep industry connections do well.
PE firms are pros at monetizing their investment at the peak or exiting quickly . Earlier was sell to Wall Street then MLP on the energy space and then these SPACs . Rinse and repeat. Next I expect some new REIT IPOs with their rental home markets to monetize those just a guess . The list of PE assets dumped into energy MLP assets was mind blowing as well. I think they all went bankrupt.
I briefly worked for a vintner years ago, at one point getting compensation in the form of bottles of sparkling wine.
That was apparently an ongoing strategy to get dirt cheap labor —- as the boss drank up inventory, never paid taxes and continually expanded on his success narrative to customers.
Everyone loves romance, until it turns to vinegar.
Hopefully my favorite SPAC Latch will find its way into the Imploded Stocks soon.
Cheers
We had Canandaigua Winery in the Finger lakes region of Ny. They had bottles everywhere until they went poof! Black or Cohen, one of those famous short seller guys made a bundle. Good video on the Youtube about it.
A classic example of the adage that Wall Street doesn’t sell what will be profitable for you, they sell what will be profitable for THEM.
My neighbors from a decade ago owned a sizable Central Valley vineyard. They made most of their money on the service side especially for kosher customers. Not sure if the case now but they struggled with inroads to China, where wine is popular but subject to high tariffs and other difficulties. The great recession hit hard as well as people would go from a bottle to two glasses and more money was made selling by the bottle in restaurants. I oddly completely lost my taste for red wine a few years back. Nice Modelo or a sweet white wine for me now!