Philz Coffee has sold to private equity company Freeman Spogli & Co. in a $145 million deal that cancels its common stock and stock options, according to a press release from the company.
News of the pending deal was broken on July 31 by Mission Local.
No employees will be laid off, and no stores will close as part of the deal, according to a Philz Coffee FAQ for stakeholders.
Each current Philz Coffee employee, from baristas to C-suite, will receive a “thank you” bonus as part of the deal, which will range in amount depending on employee rank.
CEO Mahesh Sadarangani will reinvest all of his proceeds from the sale into the company, according to the FAQ, though earlier documents obtained by Mission Local stated that he would “reinvest a portion of his proceeds received” from the sale.
In July, Mission Local spoke to former longtime Philz employees who had bought tens of thousands of dollars worth of stock in the company and were alerted that it would soon be canceled. The company’s FAQ today confirms that reporting.
“A total of 10 former employees who chose to invest in Philz Coffee by buying common stock years ago at much higher prices than the current price of the shares will unfortunately lose the value of that stock,” the FAQ reads.
“There are no other Philz Coffee common stockholders or broader group of Philz common stockholders who were affected by the transaction.”
Philz Coffee began offering stock options to select employees in 2013. One former employee who was laid off last year said Sadarangani urged him against exercising his stock options. As those stocks are now worthless, that turned out to be prudent advice.
“Philz Coffee has been owned, in part, by private equity firms for the past 13 years, so this is not a change for the company,” reads the FAQ. The company previously received millions of dollars in investments from Summit Partners and TPG Growth; these firms will receive proceeds from the sale.
“We chose to partner with Freeman Spogli due to their commitment to preserving our rich culture, investing in our team, and supporting our constant focus on quality.”
Multiple current and former employees, however, say that culture has gone downhill in the past few years. Chris Watts, a former manager of the chain’s Mission and Castro locations, said that he walked off the job in early July when his bosses told him to reduce the hours of some of his employees, including those who were working full time.
He said the company is withholding a bonus that he earned before he left, citing his departure on bad terms.
“It’s sad to see a culture collapse,” Watts said.
perhaps a silly question, but with a sale for $145m, I assume someone is making money. why do all the employees who worked and invested in their company get burned like this? at the very least, I would think Philz would want to put a better spin on this by buying the shareholders out. ??
Google preference stack. What likely happened is that the investors who put $75M in cash in the biz had a 2x liquidation preference. Meaning they were owed $150M before common shareholders get a penny. This is quite common in venture investing. That said I’ve also seen deals where they come up with a way to give common shareholders a little something even though they legally don’t have to.
The top 10% will see a pay out, anyone else will actually take a loss in their taxes. While the CEO commits to put his share back in, thats a minimal amount to those who have invested and will see nothing. We were offered l, through Canva to buy stock at $70.38 – some trusted the company enough, as a people company, to invest. My understanding is now they will be offered less then $3 a share. The employees who invested are the ones that paid high salaries for the top tier to only end up at the bottom of a “people” company
So excuse my ignorance but how is it possible that “common stock” or whatever can be “cancelled” in this case? Honest, sincere question. Could these people have known that this was possible if they had only read the fine print??
If somebody wants to explain how this p e douche didn’t just rob people… I’d be happy to hear it…
See my reply to wmm above
Still zero trust, still douchey behavior. The owners were greedy, naive and foolish, and took a lot of workers down. Nouveau-rich-watermelon-immigrants-fail, big time. Good riddance!
“… has been owned in part by private equity firms for the past 13 years, so this is not a change for the company”
As far as the common stock holders is concerned, I suppose they’re saying: Your bad you trusted us all these years. D. Trump style. So effectively they’re flushing the remains of their brand down the toilet over are full ten employees’ company shares. Well, while at it, they might as well rename the whole outfit to Philz Swilz.
As everyone knows, or should know, stock options are highly leveraged bets on the success of the enterprise. If your employer then goes public, you clean up, like secretaries and cleaners at Google did. But if you don’t, or go private, you lose out. In fact most options expire worthless.
Those 10 employees gambled at the casino and lost. They aren’t victims. They are speculators.
Philz… going out on a sheisty note!
It’s expensive coffee, for pete sake.