By Matt Stanley/General Manager
Published in the Co-op’s Winter 2016 Newsletter
Our Owner Equity Drive in October 2015 was a resounding success. Hundreds of owners paid off their shares, made an equity payment ahead of schedule, and some even forked over an additional $100 in equity to help us raise nearly $30,000 to kick off our expansion. But our expansion plans require significantly more capital. Fortunately, we have capital raising tools at our disposal that we intend to use. To that end, we intend to offer preferred shares to our owners.
What are preferred shares?
Under the Oregon Cooperative Corporation Act co-ops can issue dividend earning preferred shares that have a specified par value. Members can purchase these non-voting shares that will provide Co-op owners an additional means of investing in and supporting a local business. Those who purchase preferred shares will watch as we build a new store with their equity! At the same time, preferred shares will allow the Co-op to leverage additional funds from banks or other lenders. Finally, preferred shares align perfectly with one of the seven cooperative principles: Member Economic Participation.
Preferred shares work like this: Co-op owner Tom wants to invest in the Co-op beyond his normal membership share. Each preferred share has a specified par value of $100. The minimum purchase requirement is 25 shares. So Tom invests $2,500 in the Co-op and will receive a 3% annual dividend on his shares, which amounts to $75 per year. If Tom has more money to invest, he can earn an annual dividend premium in addition to the 3% annual dividend. Owners who purchase 100 ($10,000) or more preferred shares will earn an additional 1% annual dividend premium. Our goal is to raise $1.3 million through the offering of these preferred shares. We hope to have an average investment of over $5,500 so we will need many Co-op owners to invest, some at the $2,500 minimum level and others at $5,000, $10,000, $20,000 and even more.
But we are getting a little ahead of ourselves. In order to offer the preferred shares we have some preliminary work to do. Specifically, we need to amend our Articles of Incorporation to establish this new class of preferred shares. The board of directors approved this amendment at its October 2015 meeting.
According to state law, our owners must approve this amendment to the Articles of Incorporation, too. We’ll need you to attend our special meeting of owners on March 2 at 6 p.m. to approve the amendment to the Articles of Incorporation. We’ll make it a fun evening full of tasty treats from Chef Andy at Street 14 Café. The board of directors will also give owners an update on the progress of our proposed expansion. We look forward to having you there!
With the approval of the amendment to the Articles of Incorporation, we’ll tentatively plan on a capital campaign this year during which we’ll work hard to reach our goal of $1.3 million through the offering of these preferred shares. In the meantime, we’ll be working with our securities attorney and fellow food co-ops who have engaged in successful capital campaigns through the offering of preferred shares in order for us to create an effective and successful campaign.
If you have any questions you can contact me for more information. We are compiling a preliminary list of owner investors that I can add your name to, as well. I can be reached at the store or at email@example.com. We are excited to take this next step toward our expanded store!