You always have to take allegations in a civil complaint with a grain of salt, since they’re unproven at this stage. But there’s a lot of financial detail in the complaint, including a supposedly sharp drop in sales and a build-up of inventory.
The most interesting allegations to me were that the family was giving a $125 million valuation to its lender, but the plaintiff alleges that “the Winery suffered from excessive back inventory as of July 2018 of over $14 million in prior vintages and an approximate 40% decline in sales over the last three years.” That’s a big drop when you have a lot of fixed costs.
Yeah, no doubt sales are falling at that release price point these days. Makes you wonder how much cult wine is sitting in libraries waiting for auction.
The quality of the wines is not at question here at all. We can all a test the fact that there are great wines out there that simply do not sell as well as they should. Question here is valuation.
Uh oh. This may be a spot of trouble for the winery. If there is a whiff of lack of status value in a brand like this it will likely mean more trouble for sales. There has to be a good deal of reputational value built into the price of all cult wines. At least there is that 300m aart collection to fall back on as security. Who know all that modern art would skyrocket in value over the years?
People love to predict apocalyptic endings to successes like Napa, and extrapolate massively from one (unclear) data point. I will take the opposite tack.
Napa is here to stay and will be a premium wine region for the rest of our lives (absent some hideous externality like a world war or some such). Yes times may get better or worse but there is far too much generational money, brand equity, corporate investment, and tourist infrastructure built up for this to go poof.
I could imagine some of the small family players having to sell in future recessions, but the region will still keep churning away.
If true, the deliberate filings of inaccurate financial statements in order to obtain loans from a federally insured depository can be felonies, unless one can----pardon the expression----pardon oneself.
Nobody is suggesting the region is in trouble, the feeling from a good portion of berserkers is that the gravy train is slowing and might well stop for a while
Bryant has always been known as an art collector so has some valuable paintings. He’s involved somehow with the board of the Tate and actually went to London to study art history right around the time he released his first vintage. He claimed to be on the board of the Museum of Modern Art at one point and he had the ceilings lowered in his co-op in Manhattan so he could install air conditioning for his paintings. By all reports he didn’t too too well when he sold the place. His current wife was an art consultant before they married.
And he’s always been involved in lawsuits.
He got sued by Helen Turley, his first wine maker, for not paying her. He lost that one. Then he sued his own attorney for allegedly screwing up his pre-nup. He sued Henry Kravis for an agreement over donating a painting that they co-owned.
It’s hard to value paintings that only come up for auction once every dozen years or so. Pretty much any estimate is going to be a guess, so arguing that he over valued his collection isn’t going to be easy to prove.
And I don’t think it will matter to Napa at all. It’s more of the same for him. He doesn’t represent Napa any more than other owners like Hall, Harlan, Getty, Kieu Hoang, Foley, Kroenke, Davis, Lawrence, etc., who are all billionaires who bought properties as a combination of fashion, fun, and investment. There are lots of Chinese looking around right now. But there will be others who will buy them out, just like Banks was bought out when he went to prison, and the personal financial problems of the owners will not have any effect on Napa as a wine region, other than replacing one owner with another.
The rate of NapaFlation has easily exceeded the true rate of inflation in recent years (“official” figures are in the 2.25% range, but if you believe that than I have a bridge in Brooklyn that I would happily sell to you), and it is unsustainable. Fans of Napa have been reluctantly absorbing these price increases due to a thriving economy and ever increasing asset prices (stocks, bonds, land, etc). Now that the wheels are falling off the economy (why do you think that as of DEC the Fed was talking about 3 rate HIKES this year, now they are telegraphing that they are about to begin CUTTING rates as early as this month), that is coming to an end.
Buyers will become much more deliberate in choosing who to support, and where they allocate their budgets. And I feel that in the aggregate, wine budgets will be lowered to compensate for greater economic uncertainty and deflating asset prices. And oh yeah, rising inflation (official and unofficial) to boot…
This Bryant case may simply be them trying to maintain their “cult status” by projecting exclusivity and limited supply when in fact there is ample buildup of supply. They are perhaps willing to inventory ever increasing amounts of their yield in the hopes that they can recoup costs by keeping the price per 750 high.
Just because someone may have a $300M art portfolio doesn’t mean that they haven’t borrowed a similar amount using the art as collateral. In my line of work I run into multi multi millionaires all the time. The asset side of the balance sheet looks great but when I look at the liability side, then suddenly the Net Worth figure doesn’t look nearly as impressive…