Yes.
Oh come on, this one is obvious!
Okay, okay, so why do you think that a company can’t go broke?
Too big to fail is a myth. Try again.
Only 25% of their sales were lost is better, but how healthy were their finances beforehand? Expenses are a thing for any business and a lot of very large businesses are floating up to their eyeballs in debt. It doesn’t take much of a loss in sales to sink a listing financial ship – and 25% is a HUGE loss!
Even if AB had all its financial ducks in a row, a 25% loss in sales over the year would be catastrophic. Beer doesn’t brew itself, let alone sell and distribute itself. Today’s sales go into tomorrow’s production. No business could easily weather such a massive loss in a short period and come out unscathed.
Any other ideas? No?
Well, here’s the thing: AB has a lot more to worry about than just sales. The loss of sales alone would cripple the company but that is just the first blow. All those ‘exclusive contract’ points of sale and distribution are being negatively affected by AB’s desire to keep a high ESG score. They can’t just go sell Coors and they can’t afford the losses. AB will either have to make them good – or get sued.
So far, AB has chosen, to its credit, to make good the losses. Of course, it can’t do that forever. Eventually, AB has to let its partner companies out of their exclusive contracts. But that may not be enough. There a huge number of companies that will go under as a result of the loss of AB business. That’s a lot of angry owners and employees. AB will be sued. It’s just a matter of time.
I’m dubious that AB can survive both the sales crash and the inevitable lawsuits from the companies that depended on AB but it gets even worse. AB is publicly traded. That means AB sells stock on the stock market. Legally, AB has a fiduciary duty to those stock holders to run their business well. Fancy term meaning that a company that trades stock is duty bound to provide value to its stockholders in as much as possible. Sabotaging your best selling product is not the way to do that.
Wanna guess what’s gonna happen? That’s right, more lawsuits, baby!
Lawsuits from investors with deeper pockets for better lawyers. Definitely not the way to stay in business.
If the Republicans take the presidency and Senate in 2024, expect a major SEC investigation to go with all the rest. That may – just may – endanger InBev itself. This part is purely speculative at this point, but Securities and Exchange Commission investigations do not do good things to your stock prices and can, in rare instances, get you barred from trading in the US. The New York Stock Exchange is still one of the largest in the world and big multinationals like InBev do not want to be removed from it.
Of course, InBev may just sell off Anheuser Busch before that can happen or even get kinda close. That would be difficult and InBev will take quite a haircut doing so. Who’s going to want to put up billions for a company that can’t give away beer?
So, can AB go broke? Absolutely. By the time the lawyers are through, there won’t be anything left.
We’re gonna miss the Clydesdales.
