BH - Biglari Holdings

[Packer16]

I agree on pay for performance but how does he make on average over $21 million over the last 4 years with his performance?  That is $80 million of shareholders funds on a call it a $600m NAV over 4 years or 3.5% per year.  This means that he has to have a $106m increase in NAV per year if you use a 1% plus 20% over 6% structure.  The book value per share has declined over the past 3 years from $330/share to $257/share or from $564m to $531m.  If you used the 1% plus 20% over 6% structure, the total cost would be $5 million per year with a ways to go to get the high water mark.  How does the $21 million in comp make sense?  I do not know the details of the calc but something does not add up.  That is why IMO there is a well justified discount to NAV here.

 

Packer 

[NBL0303]

I agree on pay for performance but how does he make on average over $21 million over the last 4 years with his performance?

 

 

Not to defend this compensation arrangement or anything - but the way he got paid is understandable and it does add up when you think about buying Cracker Barrel shares at $40 per share that shot up to over $160 per share.  The total purchase price of the CBRL stake was $241 million and the value of it including the dividends paid is about $1 billion.  And the dividends they receive are taxed at 11% (70% is excluded due to C-corp owning C-corps).  When you have an incentive agreement on an investment that is purchased for $241 million and it generates $1 billion of market value and cash payments over five years, you are going to make a significant amount of money on that.

 

Of course, the shareholders of have yet to experience any benefit from CBRL's performance - but the math of the incentive payments is apparent given the $241 million to $1 billion.

[Packer16]

But what you have is he is performing well in one area (investments) & lost alot a value in another area (operations) & he gets comped only for the area he makes money in.  PMs would love to have a comp plan like that only comp me for my winners & I can put my losers in another bucket that you do not have to pay me for.

 

Packer   

[gfp]

Again, I think the math on book value per share is not correct.

 

As to how he was compensated, he got his basic $900k / year salary from the company plus his general partner allocation.

 

Net of expenses, but before incentive reallocation to the GP, here is the performance of BH's investments in the partnerships:

 

2009: 19.9%

2010: 33.5%

2011: 13.7%

2012: 25.1%

2013: 69.1%

2014: 20.6%

2015: (13.3)%

2016: 38.1%

 

The last calendar year included in the proxy, 2016, produced $281 million of earnings from the investment partnerships (this is Biglari Holdings' share) before the incentive reallocation.  So the GP was allocated $31.6 million.  The year before nothing.  The year before that $34.4 million, the year before that $14.7 million.  That's how $80.76 million gets reallocated to the GP.  You produce annualized returns after fees of 22.5% for over half a decade with several hundred million under management and you earn it.

 

I get that it looks like a lot of money and people say how can he be paid so much when it's a piddling struggling restaurant with a poorly performing holding company stock.

 

But here's what the company made on investments after the "egregious" fees:

2012: 25.1%

2013: 65%

2014: 15.5%

2015: (13.3)%

2016: 33.7%

 

It may seem masked to most people because a.) BH shares are eliminated in most presentations but make up a huge amount of the partnerships' capital, b,) there is a very large deferred tax liability since CBRL has not been sold yet, and c,) There is a loan that was taken out against some of the CBRL shares to get at the capital for BH share purchases.  But there is over $900 million of BH capital in the partnerships at the last balance sheet date.

 

I agree on pay for performance but how does he make on average over $21 million over the last 4 years with his performance?  That is $80 million of shareholders funds on a call it a $600m NAV over 4 years or 3.5% per year.  This means that he has to have a $106m increase in NAV per year if you use a 1% plus 20% over 6% structure.  The book value per share has declined over the past 3 years from $330/share to $257/share or from $564m to $531m.  If you used the 1% plus 20% over 6% structure, the total cost would be $5 million per year with a ways to go to get the high water mark.  How does the $21 million in comp make sense?  I do not know the details of the calc but something does not add up.  That is why IMO there is a well justified discount to NAV here.

 

Packer

[Packer16]

The math on the BV is the math on the BV & that measures total shareholder return.  Biglari was able to carve out the cash flows so that he made money and the shareholders did not & he has no remorse.  If this was an innocent mistake, he would reduce his fees to offset the losses in operations.  This is not the first time he has done this & that is why Sanjeev & crew (including me) would never invest with this guy.  These returns illustrate why.  He made $750 million for BH in investments & blew more than that in business operations, thus the decline in BV.  Then he took a carry on the $750 million & did not claw back losses he incurred in operations.  In these situations, the minority investor is hosed unless management makes such a big gain & decides to share some.  Given this IMO Biglari's reputation is shot & even if he gets a good deal it questionable that a minority shareholder will share in the upside, they have not shared in any upside to date.  That is why IMO there is a discount & it will be there until Biglari leaves.

 

BTW you are correct on earning the fee if you also had the option to not invest in money losing operations but minority shareholders do not.  So from a minority shareholder perspective the amount Biglari earns for minority shareholders is the change in BV not the amount he makes on a portion associated with his fund.

 

Packer

[Max Alpha]

It may seem masked to most people because a.)

 

Looking at the performance of the investment partnerships in isolation is not going to convince anyone with reservations about the overall performance of the company and most will probably find intellectually dishonest.

 

It isn't a fund at all in the traditional sense, its just a single profitable investment ring-fenced to maximise comp in a portfolio of investments with varied returns.

 

Common shareholders will judge Biglari's comp not on the performance of CBRL, but on the growth of book value of the entire company net of a very real discount for corporate governance horrors.

 

 

 

[awindenberger]

The math on the BV is the math on the BV & that measures total shareholder return.  Biglari was able to carve out the cash flows so that he made money and the shareholders did not & he has no remorse.  If this was an innocent mistake, he would reduce his fees to offset the losses in operations.  This is not the first time he has done this & that is why Sanjeev & crew (including me) would never invest with this guy.  These returns illustrate why.  He made $750 million for BH in investments & blew more than that in business operations, thus the decline in BV.  Then he took a carry on the $750 million & did not claw back losses he incurred in operations.  In these situations, the minority investor is hosed unless management makes such a big gain & decides to share some.  Given this IMO Biglari's reputation is shot & even if he gets a good deal it questionable that a minority shareholder will share in the upside, they have not shared in any upside to date.  That is why IMO there is a discount & it will be there until Biglari leaves.

 

Packer, have you actually reviewed the company's operating performance over the past 8 years since Biglari took over? The operating companies as a whole have been profitable every year until the first six months of 2017 (and even now its breaking even). Perhaps you are thinking only of Maxim, which has been money losing since he purchased them (although its now close to breakeven); but on the whole the operating businesses have always been profitable and provided a large portion of the cash Biglari has deployed into investments.

 

 

 

[racemize]

The math on the BV is the math on the BV & that measures total shareholder return.  Biglari was able to carve out the cash flows so that he made money and the shareholders did not & he has no remorse.  If this was an innocent mistake, he would reduce his fees to offset the losses in operations.  This is not the first time he has done this & that is why Sanjeev & crew (including me) would never invest with this guy.  These returns illustrate why.  He made $750 million for BH in investments & blew more than that in business operations, thus the decline in BV.  Then he took a carry on the $750 million & did not claw back losses he incurred in operations.  In these situations, the minority investor is hosed unless management makes such a big gain & decides to share some.  Given this IMO Biglari's reputation is shot & even if he gets a good deal it questionable that a minority shareholder will share in the upside, they have not shared in any upside to date.  That is why IMO there is a discount & it will be there until Biglari leaves.

 

Packer, have you actually reviewed the company's operating performance over the past 8 years since Biglari took over? The operating companies as a whole have been profitable every year until the first six months of 2017 (and even now its breaking even). Perhaps you are thinking only of Maxim, which has been money losing since he purchased them (although its now close to breakeven); but on the whole the operating businesses have always been profitable and provided a large portion of the cash Biglari has deployed into investments.

 

So if the investments have been amazing, and the operating companies are profitable, where has the value gone for shareholders? 

[gfp]

The math on the BV is the math on the BV & that measures total shareholder return.

 

Packer, you're a good investor and I have learned of profitable investments from you that I would not have discovered on my own.  I'm not trying to defend any of this management's decisions or bless the behavior in any way.  But the book value per share that you are quoting is not correct and that is why I am pointing out that the 'math on the BV is not correct'.  I feel like this issue was just addressed a few hours and a few posts ago.  Also there has not been shareholder capital lost in aggregate from the operating companies.  The gains from the investment partnerships are still there - they haven't been eaten up by losses elsewhere.  If the partnerships were to liquidate the BH shares they hold at current market prices they would of course have a loss.  I doubt that will happen.

 

Looking at the performance of the investment partnerships in isolation is not going to convince anyone with reservations about the overall performance of the company and most will probably find intellectually dishonest.

 

If we are addressing the high compensation, the performance of the investment partnerships is where that compensation occurred. I'm not trying to convince anyone and I haven't said anything intellectually dishonest.  I have tried to point out persistent errors that others accept as fact.  I don't think they are being intellectually dishonest, I think this security is unattractive enough to them that they are unwilling or uninterested in doing their own work on it.  There is no problem with that.

 

[gfp]

racemize, the value is sitting there in the company.  folks on this board should well understand that value and market price can diverge

 

The math on the BV is the math on the BV & that measures total shareholder return.  Biglari was able to carve out the cash flows so that he made money and the shareholders did not & he has no remorse.  If this was an innocent mistake, he would reduce his fees to offset the losses in operations.  This is not the first time he has done this & that is why Sanjeev & crew (including me) would never invest with this guy.  These returns illustrate why.  He made $750 million for BH in investments & blew more than that in business operations, thus the decline in BV.  Then he took a carry on the $750 million & did not claw back losses he incurred in operations.  In these situations, the minority investor is hosed unless management makes such a big gain & decides to share some.  Given this IMO Biglari's reputation is shot & even if he gets a good deal it questionable that a minority shareholder will share in the upside, they have not shared in any upside to date.  That is why IMO there is a discount & it will be there until Biglari leaves.

 

Packer, have you actually reviewed the company's operating performance over the past 8 years since Biglari took over? The operating companies as a whole have been profitable every year until the first six months of 2017 (and even now its breaking even). Perhaps you are thinking only of Maxim, which has been money losing since he purchased them (although its now close to breakeven); but on the whole the operating businesses have always been profitable and provided a large portion of the cash Biglari has deployed into investments.

 

So if the investments have been amazing, and the operating companies are profitable, where has the value gone for shareholders?

[Packer16]

The difference here is in the shares net shares outstanding as they have declined.  The BV/share has increased about 18% per year after fees since 2012 (from $219.8/share to $431/share) with about 30% of the increase going Biglari.  On a net basis about $260m in BV has been created over 4 years with $80m going to Biglari.  One of the complications here is he is incentivized on his portfolio performance & not BV per share growth.  So while based upon his portfolio performance he has received $81m in comp over 4 years, if we apply the same incentive scheme to BV/share it would be $53m in comp.  So awindenberger you are correct the situation is not as bad as implied with operational losses, however, the amount Biglari has paid himself is about 50% higher than even than a 1% & 20% over 6% hurdle.  One observation, is I think the incentives have incentivized Biglari to pay more attention to the investments than the businesses & I think it shows in the performance of each.  The businesses have stagnated with net income declining from $23m in 2012 to $15m in 2016, however investment gains have been $240m.  If you apply a 15x multiple to net income the operations value has declined about $120m, about half the increase from investments.  I think you need to incent & take both aspects of this business into account for compensation. What you have here is Biglari getting a free option on the upside of the investment with no downside if business operations underperform.

 

Packer

[frugalchief]

What you have here is Biglari getting a free option on the upside of the investment with no downside if business operations underperform.

 

Packer

 

Is his downside not having the stock perform due to poor operating results? BH stock doesn't perform, it pulls down TLF returns = no or reduced incentive comp. However, that's limited to how much % BH is of TLF at said time.

 

I certainly hope he starts focusing more on businesses as domain increases. His time wasting at Maxim and running two different restaurants should be perceived as time spent focusing here, albeit Results.

[Packer16]

There is an effect on TLF but I think CBRL appears to have a bigger effect because despite the flat to down performance of BH, he has been able to put up good numbers for the TLF.  It appears BH has the right incentive tools just IMO not applied to the right company wide metric as Biglari can be compensated well for a portion of business doing well not offset by the portion of the business not doing so well.

 

Packer

 

 

[racemize]

There is an effect on TLF but I think CBRL appears to have a bigger effect because despite the flat to down performance of BH, he has been able to put up good numbers for the TLF.  It appears BH has the right incentive tools just IMO not applied to the right company wide metric as Biglari can be compensated well for a portion of business doing well not offset by the portion of the business not doing so well.

 

Packer

 

That is clearly true over a short-term period of time.  But that is a bit like looking at the situation through a straw.  The wide-angle lens is that over the long-run, his personal fortunes will be linked to the fortunes of Biglari Holdings as a whole.  He spent something like $300 million over the last two years accumulating shares of this company.  It is very unlikely that he would get an incentive payment in the future from Lion Fund I or Lion Fund II if the shares of Biglari Holdings don't go up (unless you think Cracker Barrel is significantly undervalued - which I do not).  And he would not get an incentive payment on the operating side without significant performance in the company underlying Biglari Holdings' shares.  The point is - over a year or a few year it is indeed true that one side or the other can generate compensation - but over the long-run he is tied to both sides and he is more incentivized than anyone to make both sides accrete value over the next 10 years.

 

It is also important to note that the three-prong initiative is coming: (1) the incentive cap on the operating side at $10 million will be dropped; (2) a dual class share will be adopted; and (3) the licensing agreement/poison pill will be ended - which makes no difference now that it is a controlled company.  This three-pronged initiative will likely send the price even lower because any press release with the words "Biglari" and "compensation" will arouse suspicion and is likely to start conversations like the last few pages of this thread.

 

Is there any evidence other than speculation that 1-3 will be changed?  I.e., from Biglari?

[Packer16]

You seem to believe the guy will not do what he has done in the past, namely, make some money but mainly for himself.  Bottom line, since 2013, he has made $80m and shareholders have lost 20% of their investment where if they invested in an index fund they would have had an 88% return.  Again this is changing chairs on the deck of the SS Biglari.  How is he incentivized or even penalized for having bad ops performance?  Why can't he keep on doing what he has done since 2013 & collect $80m while the operations value erodes offsetting a good portion of the gains in investment with no ? 

 

IMO life is to short & there are plenty of other management teams who have more aligned incentive schemes & this is the reason for the discount.  Given he has control, IMO you have to value this with a good sized discount, like a minority owner in a private business (where these discounts can be up to 40 to 50%). So given this, increases in value come from growth in the asset base that he is going to take a good part of for himself (even to the point of ring fencing portions of the company to get the compensation).  IMO this has more ways to go wrong than right.

 

Packer

[racemize]

 

It is also important to note that the three-prong initiative is coming: (1) the incentive cap on the operating side at $10 million will be dropped; (2) a dual class share will be adopted; and (3) the licensing agreement/poison pill will be ended - which makes no difference now that it is a controlled company.  This three-pronged initiative will likely send the price even lower because any press release with the words "Biglari" and "compensation" will arouse suspicion and is likely to start conversations like the last few pages of this thread.

 

Is there any evidence other than speculation that 1-3 will be changed?  I.e., from Biglari?

 

Yes - he explicitly said it at this year's annual meeting and then confirmed that the "board was considering these three changes" in an 8-K immediately after the annual meeting.  But the main thing was Sardar saying "These three things are coming."

 

So I see notes that indicate these things.

 

I believe a long time ago, we had a discussion about whether he would cap his incentives once he gained control, but I think you deleted all those posts?  In any event, it appears that he is uncapping incentives with control, and thus increasing his pay again.

 

Edit: I see that discussion was with Ragu.  But I recall we did have a brief discussion and that I couldn't find any previous posts about it, so I don't really know what your stance was.

[Packer16]

You seem to believe the guy will not do what he has done in the past, namely, make some money but mainly for himself.  Bottom line, since 2013, he has made $80m and shareholders have lost 20% of their investment where if they invested in an index fund they would have had an 88% return.

 

 

The points you make are interesting and salient but I must make the classic value investors objection to using stock price performance as an argument.  This belief is taken straight from Warren Buffett and things he has said over the last twenty-five Berkshire annual meetings: I fundamentally do not believe in using short-term stock market results as evidence in a discussion like this.  If BH's stock had gone way up over this time period - would that have made these actions okay?  Their are numerous reasons for Buffett's caution about using stock market prices as an argument and perhaps the main one is that it can change over night in either direction.  Berkshire Hathaway's stock went down over a 6 year period.  And its share price has been cut in half four times since Warren Buffett took control.  Valeants stock went way, way up and then way, way down.

 

As to the broader point - I am not sure if Sardar will make money for himself and/or for shareholders in the future - he is not a magician who can just conjure up gains for himself when he chooses.  There is a specific incentive scheme in place - so I believe if he does make money for himself it will be within one or both of the two compensation schemes: it will have mean that BH's investments through TLF II will have gone up dramatically from where they are today and/or that their adjusted book value has risen dramatically.  I do not foresee him getting a large payment if one of those things is not true.  I am not actually trying to defend the compensation arrangement or any other aspect of the company's corporate governance - but I do not think he is a magician who can conjure up large payments for himself outside of these two mechanisms.

 

I agree with you in the abstract & if this was an obscure micorcap & I would also agree but BH is a $600m company, large enough to generate real interest if there were something really good here.  Although I agree stock price is not a good short term measure over the long term it is.  As a matter of fact, one of Buffet's long term measure is for every dollar retained has a $1 of stock market value been created.  For BH, this last test has not been met.  Also you need to compare BH to the S&P 500, Buffet does.  So even for this test, the S&P 500 is up 20% per year since the beginning of 2013 while BH's BV has compounded at only 18% (with this performance being impaired by his large comp package - BV growth would have been 25% per year before Biglari's comp).  So what you have is higher than market returns overall but Biglari is taking all the excess return plus 2% for himself.  How is this a good deal for minority shareholders?

 

Packer

[bci23]

How are BH shareholders going to justify their holding when Biglari puts in the dual share structure for the shares he personally owns and then proceeds to dump all of the BH shares in the Lion Fund so he can invest in other things to earn his incentive fees on? 

[Packer16]

My point is not that Bigalri is a bad investor.  He clearly is (he has been able to compound at 25%) but as an investor in this vehicle you are getting much less even to the point where his fees reduce your return to less than an index fund.  Why would this change going forward?  If I can find investment that net fees I think will do better than an index fund, why invest in one where it has been shown in the past you will lag the index in large part due to Biglari's compensation?  This is why BTW that BH sells at discount to BV although it has been growing at 18% per year.  I think the market has it right here as the discount to BV of 25 to 30% accounts for the fact that you are going to get below index returns.  Now if somehow the compensation is less the discount will tighten or go away.  So the bet you are making here is the compensation will go down so you can get better than market returns.  However, removing a compensation cap IMO is not a good sign this will happen anytime soon.

 

Packer

[thepupil]

Why would this change going forward? 

Packer

 

1 potential factor is that Biglari's price to book has declined to 0.72x from its 2/2011 peak of 2.2x.

 

I agree there should be some discount for general sleaziness, but 30% to fully taxed book (giving him no credit for tax efficient monetization of CBRL) probably warrants a position in a trade I like to call the sleaze stub (long BH, short CBRL), which I had on at one time before moving on to higher conviction things....looks like that trade would've gotten absolutely destroyed, which makes it all the more enticing now.

 

fun case study in how much can a holdco underperform its principal asset.

 

 

[Read the Footnotes]

Why would this change going forward? 

Packer

 

a position in a trade I like to call the sleaze stub (long BH, short CBRL), which I had on at one time before moving on to higher conviction things....looks like that trade would've gotten absolutely destroyed, which makes it all the more enticing now.

 

fun case study in how much can a holdco underperform its principal asset.

 

Thepupil, Thank you for your amusing language. I think you should continue down this path. I'd like to read your promotion for your prospective "Sleaze Arb" fund. Also, I think you have only scratched the surface in the potential for creative language here. You could start saying things like, "we think the sleaze spread has really blown out in the past couple of months and we are poised to capture a meaningful sleaze premia in the future".

 

Packer, thank you for your thoughtful and thorough comments on this subject.

[thepupil]

Why would this change going forward? 

Packer

 

a position in a trade I like to call the sleaze stub (long BH, short CBRL), which I had on at one time before moving on to higher conviction things....looks like that trade would've gotten absolutely destroyed, which makes it all the more enticing now.

 

fun case study in how much can a holdco underperform its principal asset.

 

Thepupil, Thank you for your amusing language. I think you should continue down this path. I'd like to read your promotion for your prospective "Sleaze Arb" fund. Also, I think you have only scratched the surface in the potential for creative language here. You could start saying things like, "we think the sleaze spread has really blown out in the past couple of months and we are poised to capture a meaningful sleaze premia in the future".

 

Packer, thank you for your thoughtful and thorough comments on this subject.

 

RTF, you'd be happy to know that I once called my portfolio  "The INsiders" (as opposed to The Outsiders) because of all the deeply discounted stocks run by self-serving management teams I had in there. At one time I've had core positions in Select Income REIT / RMR (the Parasitic Portnoys), Tetragon (the sultans of self dealing, highwatermarks are for losers!), Biglari (the Persian pilferer), BBX / BFCF (what? they bought another candy company with their sleazy time share cash flow!), Steel Partners (the king of the minority squeezeout), Sitestar (pre-Steve and crew coming in: oh hey let's borrow money from mom at a high rate), RESI (Erbey is an INsider fo sho).  A veritable gallery of rogues!

 

for the right price, I'll sleep with the dogs. No fleas as of yet (I did lose 13% after divvies on a hedged ARCP position that I bought pre accounting fraud).

 

Fun times.

 

If one times things well and generally buys when incentives are temporarily aligned or a stock is adequately bombed and shareholders discouraged, I believe the sleaze premium is indeed positive.

[arcticfox]

To call the stock performance of BH a disappointment would be an understatement, but I find the discussions over pay and stock price performance over selected periods of time pretty difficult. Earlier in the year BH was in the 460's still below most expectations but not as bad as now.

 

For example Lloyd Blankfein has been well paid at a much bigger company (Goldman Sachs (GS)) than BH however the stock of Goldman has gone from about $185 a share in September of 2009 to $225 in almost September of 2017 - 8 years- With the modest dividend for GS the return has severly underperformed the S&P 500

 

Sardar has stated that he wants/needs control to operate BH how it best suits him and he has stated that he wants to be paid. He has both of those things now. If he follows through on the actions, dual share class, removing the company compensation limits than he will have a chance to truly demonstrate who he is working for - himself only or the long term shareholder and himself.- I think the jury is still out

 

He can be well paid and run the company for the benefit of all shareholders.

 

John Malone and his companies are all controlled and the executives are very well paid - See David Zaslav, Mike Fries, etc and some of their performance is good and some not so good.

 

BH has a reasonble margin of safety. It is going to be harder to pay himself given CBRL's stock price, much of it will have to come from other sources.

 

By the way if anyone would like to share notes or a transcript from the most recent annual meeting please post them or send me a direct message. I would be interested in reading them as I did not attend the last one.

[gfp]

Packer, I hope your investors don't compare your new funds performance against the S&P 500 with math like that.  You state the S&P 500 is up 20% per year since the beginning of 2013.  What the what?  Does that even sound right to you?

 

The posters on this board keep congratulating your excellent analysis because the numbers you are pulling out of god-knows-where are confirming the opinions they already had.  Yours included.

 

So, to recap...  22.5% annualized returns after fees for the investment partnerships over 9 years is not good enough because he got rich from his cut.  The fees are 0% of assets and 25% of profits over a 6% hurdle, with a high water mark.

 

And we need to further discount intrinsic value from book value (who values restaurants on book value?  What is SnS real estate actually worth vs. BV values) because we are underperforming an index that was A,) cherry picked out of a recent uninterrupted bull market and B,) totally mis-stated to be 20% per year when in reality it was 13.5 - 13.8% per year depending on whether we use 12/31/2016 data or today's data. (14.2% if we use end of Q2)

 

C'mon man.  You've gone from stating that BV/share didn't grow, to acknowledging that it grew at a world class rate.  You've gone from stating that he lost hundreds of millions of dollars of those gains on the operations side to acknowledging that he hasn't lost money on the operations side.

 

And now you have firmly made your point that we are destined to underperform the index by stating that the index returns 20% per year, which it hasn't and certainly won't going forward either.  And yet his track record in the partnerships after all his fees is still above that made-up number of 20% per annum.

 

It's not much of a stretch to just say, hey - this company is actually worth more than $400m but I will never buy it because of a million good reasons.  That's fine.

 

It is not a contrarian point of view to think that Biglari Holdings is a crappy investment.  It is the consensus.  At 320/share or wherever its kind of a hard sell.

 

 

 

I agree with you in the abstract & if this was an obscure micorcap & I would also agree but BH is a $600m company, large enough to generate real interest if there were something really good here.  Although I agree stock price is not a good short term measure over the long term it is.  As a matter of fact, one of Buffet's long term measure is for every dollar retained has a $1 of stock market value been created.  For BH, this last test has not been met.  Also you need to compare BH to the S&P 500, Buffet does.  So even for this test, the S&P 500 is up 20% per year since the beginning of 2013 while BH's BV has compounded at only 18% (with this performance being impaired by his large comp package - BV growth would have been 25% per year before Biglari's comp).  So what you have is higher than market returns overall but Biglari is taking all the excess return plus 2% for himself.  How is this a good deal for minority shareholders?

 

Packer

[afloridian]

Here is some info about the shares of common stock:

 

date                    2017-06-30 2016-12-31 2015-12-31 2014-12-31 2014-09-24 2013-09-25 2012-09-26 2011-09-28 2010-09-29

common stock authorized  2,500,000  2,500,000  2,500,000  2,500,000  2,500,000  2,500,000  2,500,000  2,500,000  2,500,000

common stock issued      2,142,202  2,142,202  2,142,202  2,142,202  2,142,202  1,797,941  1,511,174  1,511,174  1,511,175

stock held by company      74,589    75,009    75,511    76,616    76,636    77,159    77,503    78,155    77,778

outstanding shares      2,067,613  2,067,193  2,066,691  2,065,586  2,065,566  1,720,782  1,433,671  1,433,019  1,433,397

stk held thru lion fnds    841,223    834,889    807,069    197,533    187,109    132,406    205,743    205,743    205,743

net outstanding shares  1,226,390  1,232,304  1,259,622  1,868,053  1,878,457  1,588,376  1,227,928  1,227,276  1,227,654

 

Over this period, the company issued ~600,000 shares, and also purchased ~600,000 shares thru the funds.

 

"The total incentive reallocation from Biglari Holdings to Biglari Capital includes gains on the Company’s common stock." --2016 annual report