solid announcement
it took me three times to finally make it through luxe' post. i think he set a record for the world's longest run on sentence and possibly paragraph. congrats! it was like listening to a teenage girl talk about her first first date to "the one." i was only reading it but still looking for a button to try and turn the pitch down to keep the dogs from howling. ok - enough raining on his excitement.
the good: this provides instant credibility, is an established "category" that should provide instant demand, and they already have the distribution in place. co-branding is a major plus here as luxe noted. the margins will more than likely be significantly lower on this product due to licensing but economies of scale in production, distribution, and inventory turns could be tremendous for the bottom line. further, they can use the energy shot to "pull through" the hangover shot. this will ramp up placement. in order to get the "deal" on the energy - you have to buy so many of the hangover. once you have it - you have to place it/sell it. the hangover shot should command a higher margin.
the branding is also somewhat brilliant to capitalize on the camo/red neck craze that was captured by the duck dynasty market. again - natural tie in to Walmart. also goes right after the blue collar crowd which is only part of the hangover demographic. they tend to target a higher end blue collar and white collar crowd.
the bad: i imagine larry is going to want about 25-30% of the company in addition to certain commissions on each bottle sold. due to the cash position of the company - he will have the leverage. the founders will want to continue to keep control so the dilution will probably go at least to 250MM-300MM. that would be 2:1 to 3:1. however, if this news takes it to 52 week high - it could be argued the dilution is "worth it" since the net effect would be a higher multiple post dilution.
there is still no mention of the financing side. my guess is that will follow since that is going to be more "negative" from a dilution aspect. however, it simply would not make sense for larry or any other "brand" to get involved with out a cash infusion. my guess is that news will be closely following. i would have liked to see specifics in this release but i understand the staggering of PRs.
hard to say whether this was the big news or is part of it. while i dont think this rocks the beverage world, i do think it is very significant and it provides a much needed lift in credibility where the company was suffering due to delays and cash crunch. company still needs to turn this news and expected momentum into results and do it quickly or else the future dilution will still make it tough for long termers to participate in the success.
lets hope larry is vested long term with any/all shares his venture secures and doesnt have a short term view.
AI
