What’s going on everyone. Wanted to make a quick thread for upcoming earnings in February and IPO share unlock for Dutch Bros (BROS) in March we that might be a nice puts play for us. But Ridn2lo, what’s makes this earnings and IPO share unlock sound so good? Well let me tell you.
BROS released some preliminary figures prior to their upcoming earnings back in January, and the looks of those numbers show some pretty solid growth for BROS in terms of sales and subscribers to their rewards programs.
I think BROS might see a nice pop at earnings coming up so might be a decent play for some calls.
But the following month, BROS will be having a share unlock on 03/14 with a little over 21 million shares becoming available to sell. The beauty of this is that currently with it trading at $56, BROS is double it’s price when it IPO’d at $23. And if it has a good earnings in February, it could be trading even higher.
I’ve been playing share unlocks over the past couple of months and been testing a couple of theories in terms of what direction a share unlock may go, and in terms of BROS I definitely feel like we’ll see some downward movement. With it trading at double it’s IPO price with the possibility of that price being higher at earnings, I strongly feel there will be a substantial amount of profit taking with BROS once those shares unlock.
I currently am not holding any positions in BROS. This is not financial advice and please do your own research.
I like the 3/14 puts play for unlock as it appears they are extremely overvalued but I’m not an expert on the food service side to know if their growth numbers are significant enough to support the current market cap. My two cents on the PR’s are insiders trying to prop up the share price until unlock? I always felt a bit of meme vibe with Bros since IPO but it’s not in my market so I’m not familiar with the brand. I’m almost leaning towards grabbing some puts into ER as their financials don’t seem to support the market cap and a correction might hit before the unlock.
I’m not that familiar with the sector myself. But saying they built six additional stores (98 total) above what they previously projected for 2021, entered three new States, saw no issues in their growth from labor shortages or sales, and plans to open 125 more locations in 2022 kinda sounds bullish to me for their upcoming earnings.
I agree those numbers make me think calls as well, they just seem to be priced very high compared to peers and those numbers are small marginally when looking at multi-billion dollar market cap company. Hope someone with a bit more knowledge of the sector can add, open to playing this however it wants to pay.
Another thing that kinda makes me a little bullish on their preliminary report is that is was released on 01/10/2022. That was around the time SPY started falling from it’s ATH and dragging the rest of the market down with it. So I’m not sure if that report would have been priced in already therefore we could see a pop at earnings off this news.
Also looks like a lot of the stores they are opening at least as of late are corporate stores, rough estimates of revenue from my quick research is each shop is 3.5-5 mil in revenue and recent openings have been corporate shops and annual growth last year added half a billion in sales on low end which should reflect as strong growth in ER.
Nasdaq.com is reporting an estimated date of 02/09 for BROS earnings. But Earnings Whispers has a date of 02/16 listed for BROS earnings. Will keep updated as I try to nail an official date down.
Looks like BROS is currently trading only $3 above it’s lowest scale PT. Looks like the consensus for PT on it is $66 with a rating of “buy”. Maybe calls might be the way to go on their share unlock depending on how earnings turns out.
Need to do more digging on this but based on what I saw the lock-up looks like it would actually expire on the 3rd trading day after they release their 4Q FY21 earnings (120 days from prospectus date is 12 Jan 22 and most recent period included in the prospectus was for 2Q FY21).
Also, I believe the potential share count that could be potentially unlocked should be much higher than the 21,052,632 number which is actually the number of shares offered in the IPO. It could potentially include the 113.7m common A shares that could be issued in exchange to existing unitholders of the Dutch Bros OpCos in addition to the rest of the common A and D shares not already publicly held
They have not reported earnings for Q4 2021 yet. That is their upcoming earnings report, and what I’m waiting on a date for. There are only 21 million shares unlocking on 03/14.
My read of the number of shares that will be unlocked as early as 4 Mar:
There are a total of 34.4m Class A shares outstanding at present and after deducting the number of Class A shares issued as part of the IPO - this means 10.2m Class A shares will be unlocked on 4 Mar. This is based on the lock-up language that substantially all Class A and securities convertible into Class A have agreed to the lock-up.
In addition to this, there are also Class D shares and Class A common units that are convertible into Class A shares on a 1:1 basis that can also be converted and sold after this date.
Snapshot of what financials and implied valuation look like at $50. Might take some end Mar or Apr puts as the unlock may be a catalyst for a downward move
The more I dig into this the more I am convinced existing shareholders who are locked up will sell down (albeit possibly gradually) when this restriction expires.
Note: The proceeds from the IPO were used to buyout existing shareholders at $23 per share. One of the major shareholders is a private equity investor (TSG) who also sold 5+m shares as part of this transaction
