WILLAMETTE VALLEY VINEYARDS (WVVI): Not-So-Great Value
Brought to you by Drew Millegan & The Woodworth Contrarian Fund
A recently shuttered WVVI tasting room in McMinnville, OR (November 2025)
As an Oregon-based hedge fund, we often get the opportunity to more closely investigate local companies that are otherwise too small to register on most firms’ radars. Willamette Valley Vineyards (WVVI) is one of those companies. As one of the largest corporate vineyards in the state and a big player in a currently-ailing industry (the kids just don’t drink how they used to), it has shown up on our equity value screen programs more than a few times.
Unfortunately, just appearing in a value search does not make a value company. It is as much our job as managers to identify value traps as it is to pick out the potential true bargains. The low valuation of current trading seems to be justified. Let’s dig into why.
The Worst Market for Alcohol Since Prohibition
The wine and spirits industry has had a rough several years. Between younger generations drinking less - only about 50% of young adults report drinking alcohol compared to 59% just two years ago - a nosedive in the demand for wholesale and non-premium wine brands in particular, as well as a glut of wine entering the market from better-than-usual weather, the margins on making and selling wine have never been slimmer. Coming off the highs of pandemic demand, this has been a shock to an industry accustomed to expansion.
Oregon continues to produce world-beating brands that place it ahead of certain regions in specific categories (famously, Oregon Pinot Noir has trounced even the French in blind taste-tests), but it isn’t uncommon for vineyards to be pulling back on production these days, if they’re making a profit at all. Anecdotally, there has also been an uptick in both winery foreclosures as an abundance of distillery and winemaking equipment listed at steep discounts - this is the kind of environment that only the strongest firms may survive. We have doubts as to whether WVVI will be counted amongst those names.
Deteriorating Operations
Recent quarterly reporting shows WVVI’s revenue much lower (Q3 2025 down about 10.9% year-on-year to ~$8.35 million), slim operational losses ballooning from just under $0.14 million to over $1.21 million, and a loss to common shareholders of roughly –$0.33 per share. Despite positive gross margins, higher fixed operating expenses from SG&A combined with lower revenues has conspired to multiply bottom-line losses. Compound this with escalating financing costs and a capital structure built on serial preferred issuance and shelf capacity at the expense of common shareholders, and the “discount” stops looking like a mispricing and starts looking like a warning label. This isn’t necessarily a misunderstood diamond in the rough; it’s a funding model that asks common shareholders to finish their glass last to avoid cutting operational fat.
An Unbalanced Balance Sheet
As of September 30, 2025, Willamette Valley Vineyards reported total assets of approximately $107.6 million, with current assets chiefly comprising $34.3 million in inventories and $2.2 million in accounts receivable, while cash and cash equivalents totaled $372,566. The company’s liabilities amounted to $40.0 million, with key components including $12.2 million in current liabilities such as accounts payable, unearned revenue, and short-term financing, alongside $14.3 million in long-term debt and $11.0 million in long-term lease liabilities. Shareholders’ equity was $67.6 million, supported primarily by redeemable preferred stock of $45.0 million and retained earnings of $13.9 million. Compared to December 31, 2024, the balance sheet reflects a modest decline in total assets and equity as ongoing operating losses and higher financing activities have impacted retained earnings and required incremental borrowing and investor deposits for preferred stock.
Overall, this is a snapshot of a company in a deteriorating operational environment forced to shore up their balance sheet with unconventional borrowings. However perhaps the most egregious line item from their balance sheet is a growing bank overdraft balance ($600,291 as of September 30th, up from $473,016 at 2024 year end), which we as analysts almost never see reported by solvent public companies. This line item prompted your authors to phone WVVI investor relations to confirm that this expense was in fact the result of negative bank balance overdrafting and not some sort of special short-term financing agreement. What this effectively means is that the company is writing payments they cannot cash, and then covering the negative balance from somewhere else in their cashflow before it becomes an operational problem. This is not necessarily the end of the world so long as cash flows continue, however it is both a risky and expensive form of cashflow management compared to simply taking out a conventional loan. This is the sort of financial musical chairs one would be concerned to see at a local flower shop, let alone in a multi-million dollar company listed on a major exchange, and could be an indication of broader internal operational issues within the company. Where there’s smoke there could be fire, so to speak.
Top-Heavy C-Suite
Jim Bernau has been at the helm of WVVI for over 40 years. Having been among the vanguard of the first truly commercially successful vintners in Oregon, he also founded the company in 1983. In fact, Bernau has been around long enough that the initial IPO of WVVI involved him physically selling certificated shares door to door, as was common with smaller companies at the time.
Times change and people age, however. Bernau can’t stay at the helm forever, and so he and the company made the decision to make room for a new CEO beginning in 2025. The founder of wine.com, Mike Osborn based out of Virginia, has been hired to fill the role. However, Mr. Bernau still maintains his position as both Chairperson, President, and “Principal Executive Officer.” Effectively, this means that the company has added $425,000 in yearly executive compensation costs in exchange for doubling the number of top bosses - one of whom is based on the other side of the country.
This is not in of itself a concerning development, after all some overlap in top-level leadership is not unheard of. However, WVVI has unusually high SG&A overhead for a company of its size. Despite being profitable on a purely gross margin basis, these higher costs account for a large portion of the loss attributable to shareholders, which begs the question as to why new leadership had to be outsourced at all and internal options were not available or considered. This apparent doubling up of executive pay is not an insubstantial burden on company finances at a time when the company should be looking to cut costs.
Preferred Stock Shenanigans
Which brings us to how the company has been paying for recent losses. As finances continue to deteriorate, the company has come to rely on continued issuance of preferred shares, which it currently advertises at a price of $3.95 with an annual dividend of just 5.5%, along with internal per-share valuation hikes to entice potential investors. This is despite the preferred shares currently trading in the open market (symbol WVVIP) for just $3.20 - an 18% discount. From a company perspective, this is a great deal compared to raising relatively expensive short-term financing, though still a worse deal than straightforwardly issuing more common stock with no dividend (which would have come at the cost of diluting existing shareholders and insiders).
From an investor perspective, however, the prospective returns on the preferred are underwhelming. A much lower-risk certificate of deposit at your local bank, for instance, currently yields around 4.25%. One can argue that the additional benefits make up the difference - discounts on wine purchases, monthly wine tastings, and events - however on a pure ROI basis this is difficult to justify. Moreover, the WVVI preferred stock dividends as advertised are not guaranteed - meaning the payouts (at a cost to the company of over half a million per quarter) are contingent on the board declaring them. At the board’s discretion, and if financial conditions become unfavorable enough, there is a risk of the preferred dividend being cut without consequence and without accrual. Though for now the company continues to close sales of the preferred, investors are effectively buying into the equivalent of a wine club disguised as a financial investment, especially when considering that the same preferred shares at a substantial discount in the open - which offers both a better yield with the same side benefits, and technically better security to boot because of the built-in discount of principal. This suggests that the company is overpricing their preferred shares internally by quite a substantial margin in the hopes of raising more capital at lower cost.
Combined with apparent cash flow issues and balance sheet disjointedness, the rising tide of preferred share issuance has also conspired to diminish the value of the common shares. Preferred shares have preference in the event of bankruptcy (hence the name), meaning that every dollar of preferred shares issued directly counts against the potential equity reserved for common shareholders. So in addition to the poor investment return to preferred shareholders, existing common shareholders are unlikely to see as much upside in their common shares until the preferred shares are redeemed or reduced. This also means that, even at a substantial discount to fair value, the common shares remain less attractive as a value investment generally even assuming the company has an operational turnaround in the near future.
Speaking as Oregonians, this funding structure combined with very little management accountability is unfortunately relatively common among smaller Oregon-based companies. A beloved local restaurant and bar chain, for instance, once pitched to your authors a 2% corporate bond (a rate so low it rivaled even short-term treasury rates at the time), on the promise of social prestige and owner parties with little to show in the way of collateral or profitable operations. We opted to invest in more lucrative deals elsewhere, though we continue to patronize the establishment and wish them the best.
Technical Guidance
On a technical overview of the name, there is also little reason for optimism. WVVI as a stock has paper-thin volume that makes it difficult for any investor to trade more than around $20,000 of shares in any single day on a total market capitalization of just under $15 million. This makes moving in or out of a position for anyone besides small funds and retail investors exceedingly difficult (although this can also occasionally result in advantageous mispricings that cannot be exploited by larger firms). Having declined from brief peaks of over $15/share in 2021 to under $3/share, the stock has also effectively gone nowhere since the lows of the Great Recession in 2008/2009. It’s difficult to make out any sort of technical support for anything but more declines in the near future, assuming the overall fundamental picture doesn’t improve.
While it is true that there may come a point when WVVI is so cheap that it becomes a buyout/take private opportunity (current book value of $4.86 is nearly double current per-share trading), it remains to be seen how or why such a situation would come about in practice. Even given that the company is worth more dead than alive (which they do appear to be now), the senior position of preferred shares make it difficult for any common equity buyers to capitalize on any potential liquidation/acquisition of operations. Buyer beware - an investment into WVVI at these levels would appear to be more of a gamble than most would like, with little in the way of hard data or trading patterns to back it up.
Investor Outlook - Good Wine Might be Bad Investment
There may come a time when WVVI is able to turn itself around, either from a turnaround in alcohol sales or from some other miracle, but the current outlook is uncertain at best and bleak at worst. It would not be surprising, in our opinions and given their combination of debt and poor operational performance, that at some point in the near future WVVI becomes mired in serious financial stress. As Oregon enthusiasts, it would be a shame to see WVVI go the way of so many other local companies, but not totally unexpected.
However, in stocks as in business generally, it does not pay to make decisions on the basis of pride and emotion. We cannot recommend WVVI as an investment at this time, and investors in the name would be wise to place their capital somewhere else in a company with a brighter future outlook. Give them a visit if you happen to be in town, though - the wine is good so long as it lasts.
Please note that the Woodworth Contrarian Stock & Bond Fund, LP, of which the Millegan Brothers manage and are invested in, do not currently hold a position of WVVI as of the publication date of this article. They may or may not choose to modify their exposure to this name for any reason at any time. This is not a recommendation to buy or sell WVVI or any other name - investments incur significant risk, our risk tolerance may be significantly higher than the average investor, and any discussion in this article does not take into consideration your individual circumstances.
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Quinn Millegan (left) & Drew Millegan (right)
About the Managers: Brothers Drew Millegan and Quinn Millegan manage the Woodworth Contrarian Stock & Bond Fund, a hedge fund based in McMinnville, Oregon. They grew up in the finance world, and specialize in contrarian investment strategies in the US Public and Private markets.
Something missing from your portfolio may be a diversification into the Woodworth Contrarian Fund for accredited investors. Now is a great time to diversify your portfolio with an investment into a multi-award-winning fund. An exposure to a value-based contrarian strategy is a unique opportunity for your long term capital that you’re seeking aggressive returns for. With nine years of the Woodworth Fund under management, the Millegan Brothers are trained stock-pickers and experienced venture capital investors with a proven track record. Give us a call today to discuss a liquid investment with independent administration and independently audited monthly statements and a personal relationship.
