Meet and Greet
If you answered yes to even one of these questions like I did, you should consider an investment in WVVI's preferred stock. Their Series A Redeemable Preferred Stock is registered as (NASDAQ:WVVIP), with possibly more shares to come. Tread (trade) carefully as you may be able to invest at specific prices in the future.
Put simply, WVVI is a wine maker, located in the Willamette Valley of Oregon. They began in 1983, when Founder Jim Bernau purchased an estate and planted Pinot Noir, Chardonnay, and Pinot Gris. WVVI has grown since then organically and through partnerships with the Tualatin Vineyard, Elton Vineyard, and Loeza Vineyard. In order to fund two upcoming projects, WVVI has issued a series of preferred stock. WVVI will also use the issuance of shares as a way to attract wine-lovers and grow their customer base. These preferred stocks are unique in their characteristics, as I will describe below.
Back in June of 2015, WVVI began selling their Series A Preferred Stock shares to investors in Washington and Oregon. WVVI then registered those shares to attract more investors.
Here are the details of the offer: the minimum subscription for shares is 300. The maximum is up to 1,205, at the sole discretion of WVVI. I do not know if 1,205 is the initial limit and then WVVI will approve for additional shares beyond that. If someone goes through that process, please comment below.
WVVIP has varying offering prices dependent upon the timing of investment. As of right now, each share is offered at a price of $4.35/share until March 31st. That price increases to $4.45/sh from April 1st-June 30th, 2016. WVVIP is expected to pay $0.22/sh for a minimum and maximum dividend yield of 4.94-5.05%, dependent on the offer period price.
Also, the "Special Benefits For Holders..." section includes numerous other benefits of "indeterminable" value. These include: 25% discount on wine purchases directly from the winery, priority allocations to future wines, priority access to winery suite reservations, among others. An investor could keep just one share to partake in these. I will discuss briefly how one could calculate a value for at least one of those benefits shortly.
The redeemable part comes into play any time after June 1, 2021. WVVI can redeem all of WVVIP at the market, or at the following terms: (1) the original issue price ($4.15); plus all accrued but unpaid dividends; plus a redemption premium equal to 3% of the original issue price ($4.15 * .03 = $.1245).
More Bang For Your Buck
Remember those "indeterminable benefits"? Well, that 25% discount sure seems to me like I can place some sort of value to that.
Others may reach different conclusions than myself, but here is my initial takeaway: One needs a wine budget of at least $1,045/year for 5 years (redemption period as a basis) to fully pay for your investment using only the 25% discount (((300 shares * $4.35) / .25) / 5 years). If we include dividends, the minimal budget drops to $980/year ($1,045 - (300 * $0.22)). Best case scenario, WVVIP pays dividends, and is redeemed for the 3% premium. Looking solely for the dividend and redemption premium, that equates to a 4.7% annual return ((((($4.15 * 1.03 * 300) + (300 * $0.22 * 5))/ (300 * $4.35)) - 1 ) / 5 ). It is my opinion that is the best case because WVVIP would be capped at the 3% price premium to $4.27, and the market/WVVI would buy/redeem anywhere below that price.
The real kicker in the whole issuance is that owners of even one share of WVVIP can partake in the indeterminable benefits. This can truly maximize your return on investment if you are able to purchase at a reasonable price. A quick way to determine what price you should pay: take your wine budget and multiply it by 25%.
In either situation, whether you invest directly with WVVI or obtain on the market, you simply need to find the number where you can pay for your investment through the discount on wine purchases.
Left Out? Not A Problem
Unfortunately, WVVIP has been oversubscribed. To satisfy potential investors, customers, and wine enthusiasts, WVVI would like to issue additional WVVIP shares. You can fill out a form at the company's website to receive notification of when and how you can invest with WVVI. To WVVI's credit, I imagine they won't turn down this opportunity for the capital raised during this process...
WVVI comes right out and says in their recent preliminary proxy statement that if the WVVIP holders do not approve the share increase at their Feb 28th meeting, WVVI will seek alternative ways to raise money. They go so far as to say they may even issue antoher class of preferred stock that is senior to WVVIP. Either way, WVVI is ready to raise that capital as quickly as possible.
For those ready and willing to get into WVVIP right now, you can place a bid. Let me know how that goes.
For those with a little more patience, sit tight and wait for the results of this shareholder meeting on Feb 28th. On one hand, if more shares are approved, you will know the details and can invest directly with WVVI. On the other hand, if the shares aren't approved, you may be able to receive preferred stock that will likely be senior to WVVIP, but at a later date.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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