BH - Biglari Holdings

[shalab]

Well analyzed - looking forward to the next great thing in brand Biglari  ;D

He has complete control now - looking for more Biglari Cafes.

 

 

He has had complete control for over three years. I doubt you will see another Biglari Cafe per se, notably because Sardar said, "This will be the only one." You may and probably will see other vanity projects though.

[Txvestor]

Well since Mr Bigs is such an upstanding guy, perhaps we should give him the benefit of the doubt.

Vanity and pet projects can be quite self serving and aggrandizing. When he spends the company money to serve his ego, the shareholders lose. We saw that with the insignia and air t purchases.

So whatever cash flow there is can keep getting pissed away. And anyone that questions it does not have a long enough time horizon! LMAO! Having consolidated control with the tacit support of many of the die-hard shareholder who are still holding on, who can question him if he chooses vanity project after vanity project. This guy has engineered quite the modern day heist. Will something he does work out, perhaps, but will he accept that what he has done over the past 7 yrs has been value destructive, NEVER. And those of you hanging in there were fully aware, but what I notice is a lot of purported longs are more of traders of the stock, and one wonder if they really beleive in its long term value.

 

[NBL0303]

SNS had some accounting changes, along with other similar restaurant concerns this year, they are pretty minor for Steak n Shake, but they interesting one is that they started to recognize gift card breakage for some reason now - I had wondered previously why they didn't seem to have a normal amount of breakage - but now they seem to be accounting for it more traditionally.

[OracleofCarolina]

https://www.restaurantbusinessonline.com/financing/steak-n-shake-wants-sell-all-its-company-stores

 

Worth a try

[Txvestor]

“I want to provide an opportunity to other entrepreneurs who are highly motivated to excel but lack the financial means.”

 

Unh. What an altruistic guy.

Sure hope people do their due diligence.

[pcm983]

Curious if anyone on the board has ever considered pursuing something along the lines of what Sardar did at BH - not including all the self-dealing but more the turnarounding a microcap company that's being mismanaged. Curious what sort of % stake you think is needed to garner control.

[NBL0303]

Curious if anyone on the board has ever considered pursuing something along the lines of what Sardar did at BH - not including all the self-dealing but more the turnarounding a microcap company that's being mismanaged.

 

Sitestar/Enterprise Diversified - was a turnaround of a microcap executed by two very smart CoBFers (and some other people connected to those two were also involved in the turnaround) who fought for and achieved control of the company and then executed the turnaround, recap, and transformation of the company.

 

Curious what sort of % stake you think is needed to garner control.

 

This is completely dependent on the specific details of the company. Especially with microcaps, often management will have a controlling stake or a near-controlling stake or some other party will have a large stake. The % you need to win effective control can vary greatly depending on the current makeup of the shareholders, the structure of the company and its bylaws, and other often idiosyncratic factors.

 

[Sportgamma]

Curious if anyone on the board has ever considered pursuing something along the lines of what Sardar did at BH - not including all the self-dealing but more the turnarounding a microcap company that's being mismanaged.

 

Sitestar/Enterprise Diversified - was a turnaround of a microcap executed by two very smart CoBFers (and some other people connected to those two were also involved in the turnaround) who fought for and achieved control of the company and then executed the turnaround, recap, and transformation of the company.

 

Curious what sort of % stake you think is needed to garner control.

 

This is completely dependent on the specific details of the company. Especially with microcaps, often management will have a controlling stake or a near-controlling stake or some other party will have a large stake. The % you need to win effective control can vary greatly depending on the current makeup of the shareholders, the structure of the company and its bylaws, and other often idiosyncratic factors.

 

There's also Solitron and Premier Diversified:

 

[iurl=http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/sodi-solitron-devices/]Solitron Devises - SODI [/iurl]

[iurl=http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pdh-premier-diagnostic-health-services/10/]Premier Diversified - PDH[/iurl]

[pcm983]

Thanks for the comments. Was actually reading about those two. Basically this company is sub 15mm mkt cap and no one owns controlling stake. MGMT owns less than 5pct of the stock. Curious if this is doable with say 500k-1mm and you don't even get a controlling stake and then pitch the rest of shareholders that the company is being mismanaged and needs new management. Ton of non core assets that can be sold and the business is way underperforming margin levels it should.

[pcm983]

Interesting thanks a lot for the thoughts, really appreciate it.

[Foreign Tuffett]

The $BH selloff has continued more-or-less unabated. Any thoughts on what Mr Big might do next? My take:

 

1) He wants to use the Class B shares as currency for acquisitions. Right now that would be self-defeating, as the extremely low valuation the company currently trades at means that nearly any transaction would be value destroying -- which would likely put further pressure on the share price.

 

2) Mr Big seems to really like getting fat annual bonuses, but the Lion Funds own so much $BH stock that, in an odd and circular way, these are largely dependent on the performance of $BH stock.

 

This makes me think that Mr Big, breaking with tradition, may actually do something shareholder-friendly in the short to medium term. This (IIRC) relates back to a point Picasso made on this board about shareholder-unfriendly managements sometimes having their incentives aligned with outside shareholders.

 

Of course, I could be wrong, and there are some other possibilities:

 

1) Mr Big can be very patient. He may wait for Steak n Shake's performance to (hopefully) improve before he makes any moves. This could be years away.

 

2) We've seen that Biglari is willing to bend corporate law nearly to the breaking point to benefit himself. He may be planning to slowly accumulate Class A shares over time, so that he can eventually squeeze out minority shareholders. $BH is incorporated in Indiana; I'm unsure if this would be feasible under Indiana law.

 

3) He could ask the board to (yet again) alter or increase his comp, basically giving "the finger" to outside shareholders yet again

 

 

[Txvestor]

Foreign Tuffett,

 

With all due respect to the thought you have put into the various

actions Mr Bigs might take.

Guessing what a man will do is a fools errand. For this reason alone

this stock is uninvestable for me. All I can say is that showing is something

Mr Biglari is exceptionally gifted with. In fact he has that down to a fine

artform. And the current lot of shareholders are the perfect group for him.

[abitofvalue]

You answered the question already.  Whem someone tells and shows you who they are believe them.  This is a vehicle for Bigs to get wealthy and for public shareholders to support him.

 

The $BH selloff has continued more-or-less unabated. Any thoughts on what Mr Big might do next? My take:

 

2) Mr Big seems to really like getting fat annual bonuses

 

2) We've seen that Biglari is willing to bend corporate law nearly to the breaking point to benefit himself.

 

3) He could ask the board to (yet again) alter or increase his comp, basically giving "the finger" to outside shareholders yet again

 

Other items he may do -

 

Biglari club - a high-end chain of clubs for models and VIPs in St Tropez, Miami, Beverly hills, Aspen, and other such destinations. This destination will be used synergistically with Maxim for photo shoots and to introduce aspiring models to the Maxim brand. BH will pay Mr. Bigs 3-5% of revenues for privilege of using the name Biglari. He and his family will also get unlimited bottle service and prime table reservations at all clubs.

 

Biglari space expedition - Bigs will be the second civilian to go to space on Musk's rockets with BH picking up the tab. Mr. Bigs will say steak and shake by biglari at some point on his space travel which will provide advertising and marketing benefits.

 

Biglari Reality - good / valuable company owned locations of steak and shake by biglari will be sold at cost to Mr. Bigs private company freeing up cash that BH can use to opportunistically repurchase stock from the biglari hedge funds or public shareholders depending on price. In return BH will sign a long-term NNN lease agreement with annual rent escalators at only 2.5x inflation for the privelege of having a steak and shake by biglari location on such prime valuable real estate owned by Mr. biglari.

 

I could go on but you get the idea.. 

[Txvestor]

If you disagree with any of the above its because you are not an entrepreneur or

have a unique entrepreneural mindset. Lol.

[OracleofCarolina]

https://www.otcmarkets.com/filing/html?id=13039400&guid=NrIMUFbSbJNx23h

 

Man, it keeps getting worse. Market cap is under $500 million now, about the same as their investments, cash, net of taxes.

 

Same store sales -6.9% and traffic -6.6% for Steak N Shake in the 3rd quarter.

First Guard is working out but Maxim looks like a bust. One of the few bright spots in this report was franchising is increasing.

[Txvestor]

Don’t worry, That $500M appears earmarked for various activities/projects of Mr Bigs liking.

Bondholders of SNS have genuine reasons for concern in my view. This is an ugly Q. Don’t think

I have seen such SSS declines except at Sears of late!

[Foreign Tuffett]

https://www.otcmarkets.com/filing/html?id=13039400&guid=NrIMUFbSbJNx23h

 

Man, it keeps getting worse. Market cap is under $500 million now, about the same as their investments, cash, net of taxes.

 

Same store sales -6.9% and traffic -6.6% for Steak N Shake in the 3rd quarter.

First Guard is working out but Maxim looks like a bust. One of the few bright spots in this report was franchising is increasing.

 

Actually somewhat less once you make all 1,000,001 adjustments.

 

I agree with you that SSS were just horrid. I think it's probably fixable, but whether Mr Big will be introspective enough to realize that his "race to the bottom" price strategy is failing is an open question.

 

 

 

 

[valueyoda]

As much as I distrust Biglari, the discount really starts to become appealing. Biglari needs to sell Maxim as soon as possible and find a great operator for SNS. It is kinda ironic that Biglari blasted Cracker Barrel for operating inefficiently and poor capital allocation, while CBRL almost hits all time highs in both stock price and operating performance and SNS is hitting its worst performance on a  restaurant basis in many years.

[Ballinvarosig Investors]

When the company shows depreciating book value as it is doing now, that is the stage at which Biglari will refund his previous year's bumper bonus, right?

 

 

[DanielGMask]

Buffett/Munger Investment Checklist:

 

Understand the business

Favorable long-term prospects

Operated by honest and competent management

Very attractive price

 

You shouldn’t invest your money with the likes of Biglari, no matter the price.

[Txvestor]

This thing is $140 and I haven't seen a coherent plan for a SNS turnaround articluated.

I am curious as to what the bulls are thinking here, or have they quietly abandoned ship? This thing has generated so much debate over the years, that it would be nice to hear their case now.

Ironically I think an economic slowdown is more likely to help SNS at its lower prices. I have to say, as a brand, its not doong particularly well now though,

On CBRL, that is a one trick pony and good for them for putting bigs in the doghouse. Maxim is toast and as are many other of his ventures. First guard is of a size that hardly registers. He took his share of the upside before it was properly realized and now the hole is so deep, I suspct he will change the rules of the game. Intrigued to find out how.

Frankly, he oversold himself as both an investor as well as an entrepreneur.

[shalab]

I have no current holdings in this stock though I have owned it in the past. It was profitable for me.

 

Looking at Q3 10-Q, looks like:

 

SNS is problematic with deeper losses in Q3

Western Sizzlin is doing ok

First Guard is fine

Maxim did ok in Q3 and overall has reduced losses in 2018

Corporate overhead drove the businesses to a loss in 2018 and has increased by 36% Year over Year

 

Biglari has done very well and will continue to do well. The shareholders are holding the bag with no gain to show for since 2010.

 

This thing is $140 and I haven't seen a coherent plan for a SNS turnaround articluated.

I am curious as to what the bulls are thinking here, or have they quietly abandoned ship? This thing has generated so much debate over the years, that it would be nice to hear their case now.

Ironically I think an economic slowdown is more likely to help SNS at its lower prices. I have to say, as a brand, its not doong particularly well now though,

On CBRL, that is a one trick pony and good for them for putting bigs in the doghouse. Maxim is toast and as are many other of his ventures. First guard is of a size that hardly registers. He took his share of the upside before it was properly realized and now the hole is so deep, I suspct he will change the rules of the game. Intrigued to find out how.

Frankly, he oversold himself as both an investor as well as an entrepreneur.

[Foreign Tuffett]

https://www.otcmarkets.com/filing/html?id=13039400&guid=NrIMUFbSbJNx23h

 

Man, it keeps getting worse. Market cap is under $500 million now, about the same as their investments, cash, net of taxes.

 

Same store sales -6.9% and traffic -6.6% for Steak N Shake in the 3rd quarter.

First Guard is working out but Maxim looks like a bust. One of the few bright spots in this report was franchising is increasing.

 

Actually somewhat less once you make all 1,000,001 adjustments.

 

I agree with you that SSS were just horrid. I think it's probably fixable, but whether Mr Big will be introspective enough to realize that his "race to the bottom" price strategy is failing is an open question.

 

Looks like the answer is "no, he will not."

 

https://www.prnewswire.com/news-releases/steak-n-shake-introduces-new-444-menu-300755623.html

 

While Steak n Shake is undoubtedly counter-cyclical, something is clearly broken as it's struggling to print a positive OP # despite owning so many stores and having a significant # of franchises stores.

 

I think the issue is that (1) extremely low menu prices lead to (2) attracting extremely price-conscious consumers who don't tip, which leads to (3) quality employees not wanting to work at a high traffic restaurant filled with cheap customers who don't tip, which leads to (4) all aspects of the restaurant's overall operations and service quality suffering, which leads to a reinforcement of (2) as all but the most value conscious of consumers go elsewhere. It's a self-reinforcing race to the bottom.

[Cevian]

A thought experiment below so please bear with me. Also, you never know if Mr. Bigs reads these types of threads about himself.

 

Assume that, now that he has complete voting control of the shares, Mr. Bigs suddenly announced that he would do away with the Biglari licensing agreement and set his own salary to a fixed salary of $100,000 to emulate Buffett his hero, would that change how the market reflects the share price?

 

Again, I know I'm dreaming but I'm curious.

[gfp]

In your thought experiment does he still transfer $8.4 million annually from Biglari Holdings to Biglari Capital for "services" at the hedge fund?

 

A thought experiment below so please bear with me. Also, you never know if Mr. Bigs reads these types of threads about himself.

 

Assume that, now that he has complete voting control of the shares, Mr. Bigs suddenly announced that he would do away with the Biglari licensing agreement and set his own salary to a fixed salary of $100,000 to emulate Buffett his hero, would that change how the market reflects the share price?

 

Again, I know I'm dreaming but I'm curious.