This month in financial history.
A couple of months ago, we told you about creation of the Guinness Book of Records. This month we’re going to go back even further into Guinness history. In October 1886, the Guinness Brewery went public on the London Stock Exchange.
Guinness was founded in 1759 as St James’s Gate Brewery by Arthur Guinness in Dublin, Ireland. By 1838, the company had become the largest brewery in Ireland, and by 1886 it was the largest brewery in the world. At the time, the company was producing about 1.2 million barrels of beer per year. Arthur Guinness’ grandson Sir Edward Guinness announced he was selling his 65% stake in the company in an initial public offering for 6 million pounds, which was a heck of a lot of money in 1886. Sir Ed enlisted Barings Bank to underwrite a public offering of his company’s shares.
When the prospectus for Guinness’ IPO was distributed to investors, those who bothered to review the financial statements were not overly impressed. It shouldn’t have taken long to read. The whole prospectus was only 5 pages long, which included the application form and the company constitution.
But despite the seemingly expensive price, speculators took a shine to the company. When the 36 hour application period opened on a Saturday morning, chaos erupted at Baring’s Bank as investors lined up to submit their subscriptions. The demand was overwhelming, and the bank had to shut its doors in 3 hours. The crowd became so out of control that a special police unit was called to guard the bank’s entrance. Speculators resorted to tying their subscription forms to rocks, and hurling them through the Baring’s Bank windows in a desperate attempt to purchase shares. Some sources estimated that Guinness’ shares were 30x oversubscribed and Guinness stock soared 60% on its first day of trading.
Guinness remained listed until 1997, when it merged with Grand Metropolitan to form Diageo, now one of the largest drinks companies in the world. Guinness Draught is still produced at the St James’ Gate Brewery in Ireland to this day.