The company, privately owned by the Beckmann family, is said to be working with J.P. Morgan Chase & Co (JPM), Morgan Stanley (MS), and Banco Santander SA.
With J.P. Morgan taking an apparent lead role in the discussions, Jose Cuervo could be the elusive first IPO on the Motif Investing platform.
Jose Cuervo is considering an IPO in either the US or Mexico. Based in Mexico, it may make sense to trade on the Mexico City exchange.
However, the customer base in the US is a heavy consumer of the tequila, and a listing on a US stock exchange may be an excellent opportunity for publicity.
Before you head down to Senor Frogs and celebrate with body shots, let’s take a look at what’s fermenting.
Ambitious Plans for Expansion
Through an IPO, the company is looking to raise a billion dollars to help its ambitious expansion plans. The plans include long-term investments toward making the Mexican town of Tequila a tourist destination, similar to other great beverage destinations such as Napa Valley, California and the Champagne region of France.
This despite widespread cartel violence that plagues the country.
The Beckmann family also has plans to further expand its market share of premium tequila. The Jose Cuervo most of us know appeals to frat guys and casual Margarita Mix drinkers.
Premium tequilas have found their way into drinking glasses as demonstrated by premium brands like Patron and Don Julio. Not one Jose Cuervo bottle made this Top 10 tequila list, though its Cuervo Reserva de la Familia is well known among aficionados.
Why the Jose Cuervo IPO Could be an Opportunity for Regular Investors
If Jose Cuervo does go public, the company would join fellow wise man Jack Daniels (Brown-Forman) as a publicly traded spirit brand. The third wise man, Jim Beam, is owned by privately held Suntory in Japan.
- Does the company have a strong brand and customer base?
- Is it large enough to allocate some shares to non-Wall Street investors?
- Does the company have anything to gain from offering shares to regular investors?
- For Motif Investing, is J.P. Morgan the lead underwriter?
Strong Brand and Customer Base
Jose Cuervo claims the number one tequila brand by volume in the US and the world. Strong brand? Yes.
If the size of the Jose Cuervo customer email list is significant, the company could offer shares only to customers. However, a quick look around the website didn’t uncover an email sign-up list, a la The Honest Company. Jose Cuervo seems to rely more heavily on socials; its Facebook page has nearly 1 million likes, Twitter close to 60,000 followers, and Instagram about 16,000 followers.
Given the apparent lack of email list, if the Jose Cuervo IPO is listed in the US, the potential for general public share access is greater than a company with an exclusive email list.
Would the IPO be Large Enough?
Reports suggest the IPO is aiming to raise $750 million to $1 billion. That amount should be plenty large to offer a portion to regular investors.
For comparison, the Blue Buffalo IPO (BUFF) raised $677 million and the Teladoc IPO (TDOC) raised $157 million. Both companies offered IPO shares to the general public on the Loyal3 platform.
What Does the Company Gain Offering Shares to Regular Investors?
The main benefit to offering IPO shares to the general public is publicity. Setting aside 5% of shares on a small investor platform would initiate some extra media attention. If the company decides to go public in the US instead of Mexican markets, it will surely be doing so, in part, for the attention.
Imagine the fanfare at the NYSE the morning of an IPO. Free shots for floor traders!
On top of that, many customers are US based. Giving them an opportunity to own stock in a brand they love would strengthen brand loyalty. Fans of brands who are also shareholders are less likely to sell the stock and more likely to buy the product.
J.P. Morgan and Motif Investing?
As previously written about, for IPOs where J.P. Morgan is the lead underwriter, Motif Investing will offer all of its customers access to IPO shares. In most articles I read about conversations between bankers and Jose Cuervo, J.P. Morgan was mentioned first, along with Morgan Stanley. These deals often work move forward with multiple underwriters. The first mention in the eventual S-1 filing is usually the lead.
So if J.P. Morgan is indeed the sole lead on this potential deal, regular investors like you and me may have a shot. If the two investment firms are co-lead underwriters, this scenario is less likely.
The one thing you can do today is to sign up for a Motif Investing account. You won’t need to fund it until an IPO opportunity comes along.
Often when an opportunity arises, the time frame to request shares is very brief. So it’s best to have your account already set up so you can log right in and reserve shares. Once your request for IPO shares is in, then you can fund your account.
Part of successful investing in IPOs is anticipating what opportunities might be on the horizon and to be ready for them. The reports of a potential upcoming Jose Cuervo IPO provide us optimism in these marketplace doldrums.
The Jose Cuervo IPO seems like a good candidate for small investor access given the strong brand, the probable lack of email list, and the company’s desire for publicity.
The media leaks about IPO talks alone are enough to show the company’s interest in publicity. And if they are looking to build the Mexican town of Tequila as a global specialty beverage destination, who do you think they want to visit? US citizens, that’s who. Why not invite shareholders first?
Disclosure: The author does not own shares in any companies mentioned in this article.