innerscorecard Posted June 5, 2015 Share Posted June 5, 2015 Gabelli just replied to someone else about the tender with a very cryptic comment: Link to comment Share on other sites More sharing options...
giofranchi Posted June 5, 2015 Share Posted June 5, 2015 Not sure why every comment is met with a "sell and get out" response. It is quite irritating actually. Well, you are always repeating the same things… What else can I do?... Except always answering the same way?! ;) That said, I think it is quite rational to have the opinion that the shares are undervalued and also not wishing Sardar based on his past actions have such utter and complete control of the company, right? The market is saying precisely that by applying the biglari discount right? Right! And that’s exactly why I don’t think any “Biglari discount” is warranted! But it is welcomed: if the tender is successful, both Biglari and I will own 25% more of BH than what we owned before. My larger point was that if the business results later do prove to be worse than expected the market "discount" to any tangible measure of value will be even more steep than it already is, as other more constructive exit options such as a shareholder instigated change of operational control will be out. The market will know this and price shares appropriately. Ah! So now you think you know which kind of business results the market is expecting from BH selling below BVPS… Come on! and business results improve dramatically. Wrong! Business results don’t have to improve dramatically, I just would like they remain in line with what they have been until now. Unfortunately, they most probably won't... Thus far I haven't judged his management performance worthy of the 25% above 6% hurdle price. Then you think no one should be paid that much. Ciao, Gio Link to comment Share on other sites More sharing options...
peridotcapital Posted June 5, 2015 Share Posted June 5, 2015 The big question I have is whether Sardar will ever actually purchase and retire BH stock. That is what I would like to see eventually, if the price stays where it is. I do not see why this should matter… Biglari is buying all those share with BH’s shareholders’ capital; therefore, those who remain BH’s shareholders after the tender has expired, provided Biglari is successful in repurchasing all the shares he wants to, will have their slice of the pie increased by 25%. Of course, if he were to retire those shares, he would lose voting power… Why should he do that? Gio Having the Lion Fund own BH shares is not the same thing as BH repurchasing the stock. The size of the pie is not changing, so this tender is not accretive. In fact, by doing an above-market tender, it is actually dilutive. I'm not saying he should be retiring shares now, but once he has a firm hold on the votes, that is what I would like to see (provided they continue to sell at a material discount to intrinsic value). Link to comment Share on other sites More sharing options...
giofranchi Posted June 5, 2015 Share Posted June 5, 2015 Having the Lion Fund own BH shares is not the same thing as BH repurchasing the stock. The size of the pie is not changing, so this tender is not accretive. In fact, by doing an above-market tender, it is actually dilutive. But the Lion Fund is using BH’s shareholders’ capital to buy those stocks, isn’t it? It is not using outside investors’ money. Right? Therefore, imo the Lion Fund is buying those share on behalf of BH’s "remaining" shareholders. Instead of using BH’s capital to invest in another company, the Lion Fund is using it to buy BH shares. Let’s look at it this way: I had $420, instead of keeping the money I have decided to hand it to Biglari, he now manages the money on my behalf, and he puts it into the Lion Fund, and then he buys 1 BH share with the money. That BH share is "mine", except that Biglari has the power to decide what to do with it, not me. And except I will have to give back to Biglari 25% of its appreciation above 6% annual. Gio Link to comment Share on other sites More sharing options...
peridotcapital Posted June 5, 2015 Share Posted June 5, 2015 Having the Lion Fund own BH shares is not the same thing as BH repurchasing the stock. The size of the pie is not changing, so this tender is not accretive. In fact, by doing an above-market tender, it is actually dilutive. But the Lion Fund is using BH’s shareholders’ capital to buy those stocks, isn’t it? It is not using outside investors’ money. Right? Therefore, imo the Lion Fund is buying those share on behalf of BH’s "remaining" shareholders. Instead of using BH’s capital to invest in another company, the Lion Fund is using it to buy BH shares. Let’s look at it this way: I had $420, instead of keeping the money I have decided to hand it to Biglari, he now manages the money on my behalf, and he puts it into the Lion Fund, and then he buys 1 BH share with the money. That BH share is "mine", except that Biglari has the power to decide what to do with it, not me. And except I will have to give back to Biglari 25% of its appreciation above 6% annual. Gio None of what you said is incorrect, but it doesn't change the fact that with this tender 1) the size of the pie is not changing, and 2) the total marked-to-market value of the pie is declining. TLF buying BH shares is no different than TLF investing in any other public company, in the sense that the value creation will come from any future return on the investment. Over time, Sardar's TLF incentive fee is going to result in him reallocating (from BH to himself) the very BH shares we are talking about (look at how much of TLF2 he already owns!). We have to consider these shares to still be outstanding. And to your earlier point that retiring shares would reduce his voting control, I don't think that's accurate. Buybacks increase every shareholders' ownership percentage. It's just that this method allows him to increase his voting control at an even faster pace than traditional buybacks would. Link to comment Share on other sites More sharing options...
giofranchi Posted June 5, 2015 Share Posted June 5, 2015 1) the size of the pie is not changing The size of the pie is never changing. Because the pie is the business. What changes is the size I own of the pie. If Biglari is using $420 which are mine to buy 1 BH share, and yesterday I had X BH shares, today I excpect to be owning X + 1 shares, and therefore the size I own of the pie is larger. 2) the total marked-to-market value of the pie is declining. Not sure what you mean. It's just that this method allows him to increase his voting control at an even faster pace than traditional buybacks would. That's exactly what I meant. He is a long way from controlling BH simply cancelling bought back shares. Cheers, Gio Link to comment Share on other sites More sharing options...
gg Posted June 5, 2015 Share Posted June 5, 2015 Peridot/Gio, 1) "accretive" or "not accretive" isn't affected by above-market or under-market -- that would really be weather it above/below book... 2) Regarding the size of the pie changing (ie share-count), I think you have to look at it somewhere between your two extremes. GIO: BH's money is invested in TLF2, and TLF2 is now going to own potentially 47% of the shares. Obviously those funds are Hedge Fund fee-paying, so it might not be nearly as great as simply buying the shares as retiring them outright. PERIDOT:However, if BH theoretically redeemed their funds from TLF2 and was paid in-kind, then it is easy to see why this is quite significant and very similar to an outright buyback. Link to comment Share on other sites More sharing options...
giofranchi Posted June 5, 2015 Share Posted June 5, 2015 Obviously those funds are Hedge Fund fee-paying, so it might not be nearly as great as simply buying the shares as retiring them outright. That I know very well and have already pointed out myself. ;) Gio Link to comment Share on other sites More sharing options...
ScottHall Posted June 5, 2015 Share Posted June 5, 2015 Gabelli just replied to someone else about the tender with a very cryptic comment: Do we know if this is the real Mario Gabelli? I've followed him for a while but his Tweets are incomprehensible. Link to comment Share on other sites More sharing options...
OracleofCarolina Posted June 6, 2015 Share Posted June 6, 2015 Biglari Holdings News Release http://www.cnbc.com/id/102738073 Don't worry guys about the tender, we have a committee looking into this (insert sarcasm) Link to comment Share on other sites More sharing options...
CalvinL Posted June 8, 2015 Share Posted June 8, 2015 It'll be interesting to see what the committee is going to say. If the committee recommends shareholders to tender, they're blind to value and hinting that they think $420 is a fair price for the shares. If they recommends shareholders to keep the shares because $420 is undervalued, that's against SB's wish. It'll be a tough call for the committee either way. Link to comment Share on other sites More sharing options...
ragu Posted June 8, 2015 Share Posted June 8, 2015 It'll be interesting to see what the committee is going to say. From Exhibit (a)(1)(I) attached to the tender filing: No later than ten business days from the date of this Offer to Purchase, the Company is required by law to publish, send or give to you a statement disclosing whether its board of directors either recommends acceptance or rejection of the Offer, expresses no opinion and remains neutral toward the Offer or is unable to take a position with respect to the Offer. Emphasis added to indicate what I expect will happen. Best, Ragu Link to comment Share on other sites More sharing options...
giofranchi Posted June 8, 2015 Share Posted June 8, 2015 I have sold half my investment in BH to open an 11% position in TDG. I still think BH is the cheapest of the two (by far!), but I also agree with many comments on the board that Biglari’s actions might keep BH stock very cheap for a long time… Therefore, I now plan to use part of my monthly free cash to increase my BH investment. Cheers, Gio Link to comment Share on other sites More sharing options...
tombgrt Posted June 9, 2015 Share Posted June 9, 2015 I have sold half my investment in BH to open an 11% position in TDG. Gio, just curious but what is your annual portfolio turnover rate? Seems to be at least 75% if you ask me. How does that fit with holding for the very long term? Link to comment Share on other sites More sharing options...
giofranchi Posted June 9, 2015 Share Posted June 9, 2015 I have sold half my investment in BH to open an 11% position in TDG. Gio, just curious but what is your annual portfolio turnover rate? Seems to be at least 75% if you ask me. How does that fit with holding for the very long term? I don’t know… But the companies I am interested in are almost always the same, with the possible exception of TDG (which I hadn’t researched enough until I heard it mentioned by Ackman), and now CSU (which I ignored the existence of until a few days ago…). Changes like this one are very rare indeed. Usually I buy more of what I like because I have meaningful fcf each month. This being said, changes might happen: for instance, I held a very large investment in FFH, and when they launched FIH, I shifted some capital from FFH to FIH. Even now FFH is a large position in my firm’s portfolio, and I hold part of it instead of cash… Therefore, I might decide to sell some and buy CSU… The companies I am interested in are and will probably remain just a handful! ;) Gio Link to comment Share on other sites More sharing options...
writser Posted June 9, 2015 Share Posted June 9, 2015 Tom, the problem is that you are probably not an entrepreneur yourself. If you were, you would understand that increased asset turnover leads to a higher return on assets, all other things being equal. You have to approach investing in a business-like manner. Link to comment Share on other sites More sharing options...
giofranchi Posted June 9, 2015 Share Posted June 9, 2015 Tom, the problem is that you are probably not an entrepreneur yourself. If you were, you would understand that increased asset turnover leads to a higher return on assets, all other things being equal. You have to approach investing in a business-like manner. I at least have the transparency to say what I am doing plainly for everyone to see. In a public board I think it is not very common… Now that I think of it, I have never heard you share with others what you are doing… But of course you are very good at criticizing… That’s for sure! You are funny and sarcastic… Just curious… Can you tell us how old are you? Gio Link to comment Share on other sites More sharing options...
innerscorecard Posted June 9, 2015 Share Posted June 9, 2015 Gio, was the "risk" that TDG stock would appreciate by the end of July high enough that it meant selling BH on the open market was worth it over tendering your shares for $420? Appreciate your thoughts as always! Link to comment Share on other sites More sharing options...
giofranchi Posted June 9, 2015 Share Posted June 9, 2015 Gio, was the "risk" that TDG stock would appreciate by the end of July high enough that it meant selling BH on the open market was worth it over tendering your shares for $420? Appreciate your thoughts as always! No! But I have sold at $414... Besides, I have never tendered a share before... I don't know the process, and I am not sure how my bank would handle it... Let's just say it was easier for me to sell BH on the open market... But probably it has been a mistake! ;) Gio Link to comment Share on other sites More sharing options...
writser Posted June 9, 2015 Share Posted June 9, 2015 Tom, the problem is that you are probably not an entrepreneur yourself. If you were, you would understand that increased asset turnover leads to a higher return on assets, all other things being equal. You have to approach investing in a business-like manner. I at least have the transparency to say what I am doing plainly for everyone to see. In a public board I think it is not very common… Now that I think of it, I have never heard you share with others what you are doing… But of course you are very good at criticizing… That’s for sure! You are funny and sarcastic… Just curious… Can you tell us how old are you? Gio Gio, if you were truly interested in my portfolio you could've read about it in, amongst others, the threads about Conduril, Clarke, Retail Holdings, Safeway, Pardee Resources, Fujimak, Senvest, PD-RX and Conrad industries. So I guess you were just trying to make a point. If not, feel free to send me a PM or to open a new thread about my holdings. I will happily answer any question you have. That way we don't derail this thread any further. I would prefer not to disclose my age, nor my ethnicity, gender, religious beliefs and/or my blood type. I would like everybody to judge my posts on their merits only. Link to comment Share on other sites More sharing options...
giofranchi Posted June 9, 2015 Share Posted June 9, 2015 Gio, if you were truly interested in my portfolio you could've read about it in, amongst others, the threads about Conduril, Clarke, Retail Holdings, Safeway, Pardee Resources, Fujimak, Senvest, PD-RX and Conrad industries. So I guess you were just trying to make a point. If not, feel free to send me a PM or to open a new thread about my holdings. I will happily answer any question you have. That was not my point. My point, instead, is I don’t find many people who are transparent about their holdings and about their buying and selling actions on a public board… Instead, I find many people who really enjoy talking a lot!!… The few times I looked at those threads you have mentioned, I never saw you disclosing anything… But probably I have just missed the most important posts of yours! ;) Gio Link to comment Share on other sites More sharing options...
writser Posted June 9, 2015 Share Posted June 9, 2015 Instead, I find many people who really enjoy talking a lot!!… And you would say you are not one of these people? You would be better off researching how your broker handles tender offers rather than replying to my lame joke :) . With regards to transparency - would this board be better off if everybody posts every trade they make? I don't think so. I don't pretend anybody is interested in my portfolio unless proven otherwise. I am no David Einhorn or Carl Icahn. Link to comment Share on other sites More sharing options...
giofranchi Posted June 9, 2015 Share Posted June 9, 2015 You would be better off researching how your broker handles tender offers rather than replying to my lame joke :) I agree 100%! ;) And from now on I suggest you behave like this: if you happen to think about another lame joke of yours, send me a PM… And we will have a laugh together!... On a public board, instead, it sounds more like an attack than a joke… On the other hand, disclose what you are really doing publicly, not through any PM… Cheers, Gio Link to comment Share on other sites More sharing options...
CalvinL Posted June 9, 2015 Share Posted June 9, 2015 You would be better off researching how your broker handles tender offers rather than replying to my lame joke :) I agree 100%! ;) And from now on I suggest you behave like this: if you happen to think about another lame joke of yours, send me a PM… And we will have a laugh together!... On a public board, instead, it sounds more like an attack than a joke… On the other hand, disclose what you are really doing publicly, not through any PM… Cheers, Gio Yea guys I agree with both of you...this post has had some great discussions about BH so far and let's keep it on. To tender through your broker - your broker should be sending you the offer letter and providing instructions for tendering your shares. I wonder if anyone here is buying additional BH shares after the tender offer announcement, plan to keep the shares and secretly hoping that the tender offer will get over-subscribed? ;) Link to comment Share on other sites More sharing options...
frugalchief Posted June 9, 2015 Share Posted June 9, 2015 I wonder if anyone here is buying additional BH shares after the tender offer announcement, plan to keep the shares and secretly hoping that the tender offer will get over-subscribed? ;) I like the idea of the tender, but being a small investor I was pissed when I heard the news! Been saving my dollars to buy the shares at $350 only to have them rise. Argh! :'( Guess I'll just save for the next rights offering 8) Link to comment Share on other sites More sharing options...
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