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Well, Black Rifle Coffee is in trouble again.
For the third time.
But this time, we’re not just talking about some mean words and bad PR being thrown around
- no, this time, it’s looking like the company is collapsing in on itself under a trifecta
of tanking stocks, a fraud investigation, and two -count it, two - lawsuits.
We’re talking financial fraud, market manipulation, contract violations, huge losses, you name
it.
Trouble is definitely brewing - stick around for the details.
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Hello ladies and gentlemen and welcome back to the channel.
Before we go on this deep dive, and it is deep, this video is sponsored by Brownells
and their forever guarantee.
Brownells has a huge selection of over 90,000 products of anything and everything from freedom
seeds to emergency gear.
Their website is constantly updating with new deals and promotions you won’t find
anywhere else.
Whether you’re an outdoor hobbyist, a gunsmith, a tinkerer, law enforcement, or just someone
looking to put food on the table, they’ll have everything you need.
To check them out and support the channel, use my link down in the description.
Also, I do want to mention, I sometimes get comments from folks asking why I sell Black
Rifle Coffee despite all of their issues.
I AM an affiliate with a different company, BlackOUT Coffee, They’re been super supportive
of the channel, the second amendment, and veterans, and are a completely different company.
I’ve never been affiliated with Black Rifle Coffee in any way.
Now that that’s out of the way, let’s do a quick rewind in case you missed the first
couple videos on how this mess all started, which I’ll also link up in the cards.
First mistake - the company came out and denounced Kyle Rittenhouse.
Then, CEO Evan Hafer very stupidly did an interview with the New York Times, where he
complained about his customers being dumb white supremacists and lumped Kyle into that
camp.
The article also talked about pulling designs because they’d allegedly been linked to
racism.
This of course ignited some backlash, but the company initially doubled down, then claimed
the statements were taken out of context.
Shortly after, a couple team members did a podcast where again they claimed things were
taken out of context, but at the same time again suggested their customers are fat, stupid,
racist, military-wannabes and somehow also roped in threats to dox Alex Jones because
he talked about the controversy on his show and called the guys pussies.
This is apparently ground for being doxxed.
Overall, it was a really ugly look.
Fast forward to May.
We’ve got a legal company sending a letter to the company, accusing it of Code of Conduct
violations, breach of contract, and defrauding customers in order for company big wigs to
line their own pockets, which has turned into a class action lawsuit.
We’ve also got an investigation, a second lawsuit, and continually plummeting stocks
all coming together over the last month.
Now, investing websites are saying to avoid the company because it is flat out unprofitable.
By their reports, BRC only has $110 million left on the books.
According to Investorplace, if the company keeps losing, it won’t have enough funds
to last another year.
The article attributes at least some of the company’s losses to the New York Times interview
they did last year that drummed up a TON of bad press in the conservative community.
Less than one year after accusations of going woke, it seems the company is, indeed, going
broke.
And the weirdest part?
BRC is apparently trying to fix this by…producing Mexican rap videos.
I don't really know why.
So let’s take a closer look at all this.
In November of last year, it was announced that BRC would be going public.
The company was doing this via a merger with another company - a special purpose acquisition
company, or SPAC, called SilverBox Engaged Merger Corp.
The acquisition was expected to turn Black Rifle into a “unicorn” start-up valued
over $1.7 billion, with stocks starting at $10 a share.
A couple weeks later, they released a satire skit on their YouTube channel, featuring the
guys in a gay military uniform fashion show, with one of the guys in drag.
I found it weird, but funny - mostly weird, really, but there were a lot of folks who
didn’t like it and questioned how it was supposed to sell coffee or support the second
amendment.
Some conservative YouTubers even called for the company to be canceled over it.
Dislikes on the video are no longer visible, but, back when they were, it was ratioed.
Hard.
In February of this year, the company pulled the trigger, going public and thanking it’s
customers - LOL - for making it happen.
The press release included some comments from Hafer about wanting to support ethical veterans
and creating positivity.
And now, we get to the lawsuits.
There’s two, with the possibility of a third, and there’s a lot of overlap on the timeline
and a lot of moving parts.
Like, enough that we need a flow chart.
On May 4th, a securities firm named Hittelman Strunk announced they were investigating the
company for securities fraud claims on behalf of some of the company’s shareholders.
A press release stated there were “allegations that BRC Inc. breached their fiduciary duties
by prioritizing their own interests when they announced redemption of all outstanding public
warrants before properly disclosing the effects of shareholder dilution."
The press release includes a timeline, stating that on March 30th, the SEC proposed new rules
for SPACs that WOULD require dilution disclosures.
Five days later, on April 4th, BRC announced they’d be redeeming all public warrants,
which basically means investors had been promised stocks at a set price - in this case, $11.50
a share - and now could cash in on that price, which was about $20 lower than the Stock Exchange
listing.
From what I understand, this process is common with start-ups because it increases the share
count, but investors don’t like it because it dilutes their investment.
But don’t quote me on that, because I’m not a stock broker, or a cat.
Hittelman's issue is that the company did their dilution disclosure two weeks later.
By that time, the stock had fallen almost $11 a share, and because of that dilution,
the stock got downgraded by a major investment bank.
Losses bring lawsuits, and the company behind the investigation is now calling for folks
to contact them to join a class action lawsuit.
The next day, the firm spearheading the investigation put out another press release, this time saying
BRC filed to remove their stocks from the public stock exchange before markets opened
on May 4th, effectively stopping the public from buying or selling shares, but allowed
PRIVATE investors and insiders to sell their tanking stocks after markets closed.
The next day, they were back on public exchanges, but the stocks were listed with another 20%
loss.
Since then, the stock has continued to fall, and went from a high of $34 in April, to a
low of $8.46 on May 24th.
The stock has lost 70% of its value and the company, while reporting an increase in earnings
from last year, also reported a loss of nearly $257 million on their May 12th earnings report.
Yee-ouch.
Enter lawsuit number one, filed at the end of April.
It was filed in New York federal court by Tang Capital Partners LLC, and is charging
BRC with breach of contract and securities fraud.
Part of the complaint reads,
“BRCC improperly and unlawfully blocked Tang Capital’s repeated attempts to exercise
its Warrants to buy BRCC shares for $11.50 per share and sell those shares at much higher
prices.
Indeed, in the weeks following Tang Capital’s initial attempt to exercise, BRCC stock rose
to a high of $34.00 per share before falling all the way back down to approximately $15.00
per share as of the date of this Complaint.
By blocking Tang Capital’s attempts to exercise its Warrants and sell the underlying shares
at much higher prices and before the stock declined, BRCC caused millions of dollars
of damages to Tang Capital.”
They’re seeking damages in the amount that they would have made if the transactions hadn’t
been blocked.
So that lawsuit was filed, then we got the earnings call with the huge loss.
BRC offered out another set of warrants to try to pump some cash into the machine, and
then the second lawsuit showed up.
The newest lawsuit was filed by a different company, an investment firm called 1791 Management,
on the grounds of BRC harming both investors and veterans.
1791 manages the portfolio of at least one major BRC stakeholder, and first tried to
send a letter to the company, asking BRC to come up with an action plan to address some
of these issues, along with what they say are violations of the Conflicts of Interest
section of BRC’s own Code of Ethics.
The letter sounds a little gimmicky, calling Hafer one of the most dangerous CEOs in America,
but also outlines an alleged plan by BRC insiders to squeeze the stock in order to line their
own pockets.
According to the letter - which includes SEC materials on the market manipulation BRC is
accused of - BRC’s CFO has previously been involved in a fraud lawsuit for manipulating
stocks of ANOTHER company.
So that’s some extra sauce on this fish sandwich.
The letter also says that BRC neglected to file necessary paperwork within a required
timeframe, lied about it, and that Hafer awarded himself over 4 million shares, making a collective
$89 million dollars from stocks while the company lost 4.8 billion in value.
Which, yeah, doesn't sound great.
A few days later, 1791 filed their lawsuit, suing BRC for violations of securities law,
breach of contract, breach of fiduciary duty, negligent misrepresentation, and violation
of California law, as the lawsuit was filed in California.
That part probably doesn’t mean much, as pretty much everything except pooping on the
sidewalk is illegal in California, but we're talking sprinkles on the shit sundae at this
point.
All that being said, is the tanking stock proof of a nefarious plan?
Not necessarily.
It could just be the product of a bad economy and BRC persistently making fun of its customers
and shooting itself in the foot.
It could also be, at least in part, to the perception that they've gone woke - which,
again, isn't helped by how they've talked about their customers.
Hafer has said he doesn't care if they lose business over it, and I said back then they
might care once it hits their wallets.
Now, here we are, with the company allegedly going broke - but then Hafer supposedly raking
in millions.
Coincidence?
Maybe.
Big master plan to defraud all the customers they say they don't like anyway, and make
millions of dollars while doing it?
Also a possibility.
There hasn't been been any update yet on the Tang lawsuit, except that BRC apparently hasn't
hired a lawyer?
Kind of weird with this level of accusations.
But the first hearing for the 1791 lawsuit has been scheduled for October, so until then,
we won’t really know how valid the claims are or if there’s really any meat on the
bones of this investigation and lawsuit.
It’s entirely possible it’s just a disgruntled shareholder, but it’s just as possible that
BRC continues to dig themselves into some deep shit.
But hey, we have to admit, BRC puts out some good videos, so at least that rapper will
have some SWEET music videos.
Either way, that's it for today's video, please like, share, and subscribe if you're new here,
and drop a comment down below for the algorithm.
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As always, thanks for tuning in, stay safe, and happy shooting.
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