Texas on-premise alcohol beverage tax receipts bounce (BUD)
Texas reports its alcoholic beverages sales tax receipts monthly. In March, alcoholic beverage receipts increased 26.9% YOY, decelerating from 64.7% in February. March receipts were 7.1% higher than February as seen in the following chart. The on-premise trends in Texas point to a recovery to pre-pandemic times.
Share CLASS conversion timing is fortuitous (STZ)
Chairman Richard Sands proposed to convert the Sands’ family Class B shares to Class A shares at a rate of 1.35 shares of Class A for every share of Class B. Class B shares have ten votes each and a quarterly dividend of $.69 vs. $.76 for Class A shares. The conversion would result in the aggregate voting power for the Sands family to fall from 59.5% to 19.7%. The proposal reflects a willingness for the Sands family to give up voting control of the company at a price. The proposed conversion comes at a time when shareholders are concerned management would enter another value destroying transaction, this time with Monster Energy. Shareholders may be willing to pay the conversion price to have control over capital allocation decisions, but the conversion price is very steep. We see the letter from the Chairman as a proposal and await a more reasonable counteroffer.
Constellation Brands reports FQ4 results on Thursday. Management’s guidance for the next fiscal year tends to loom in prominence for the Q4 reports. Our estimates are more back-end loaded than the current estimates reflecting the timing of price increases and cost inflation. Management historically does not like to provide much detail on M&A, rumors, or ongoing management discussions. The share conversion will likely not be any different.
Warrant conversion (BRCC)
Black Rifle Coffee Company announced the redemption of all its warrants that remain outstanding on May 4 for $.10 per warrant. The warrants can be exercised on a cashless basis until the redemption date. The exchange ratio is based on the VWAP for the next ten days. With the shares over $18 the conversion rate would be .361. Shares of BRCC traded up 29% yesterday ahead of the announcement, with considerable interest from fintwit looking for a S-1 effective date markup. We see a bright future ahead for Black Rifle Coffee. In light of the recent volatility, we wanted to highlight our investment thesis for the company and our “multi-bagger” over a tail duration upside.
