BH - Biglari Holdings

[Cevian]

There is definitely a legal case to be made here against Biglari and the Board; unjust enrichment, breach of Fiduciary duty, etc.

 

Does anyone know what ever happened to these attempts:

 

https://www.prnewswire.com/news-releases/rm-law-announces-investigation-of-biglari-holdings-inc-300589048.html

 

http://www.andrewsspringer.com/cases-investigations/biglari-holdings-class-action-investigation

 

https://www.monteverdelaw.com/case/biglari-holdings-inc

 

 

[shalab]

Probably true - the next phase of transferring wealth from SNS to Biglari's personal account has started in earnest. Here is how it will be done:

- management fees in the millions of dollars with no cap

- general and administrative costs for personal planes and other personal expenditure

- replace milk-shake machines with "Biglari milk-shake machine" while paying fees to Biglari

 

Not clear where Biglari Cafe expenses show up.

 

With the history of deference from shareholders already, methinks it will have to go much lower before they give up on him.

[shalab]

This person will be in jail if SEC or the special prosecutor goes after him.

 

There is definitely a legal case to be made here against Biglari and the Board; unjust enrichment, breach of Fiduciary duty, etc.

 

Does anyone know what ever happened to these attempts:

 

https://www.prnewswire.com/news-releases/rm-law-announces-investigation-of-biglari-holdings-inc-300589048.html

 

http://www.andrewsspringer.com/cases-investigations/biglari-holdings-class-action-investigation

 

https://www.monteverdelaw.com/case/biglari-holdings-inc

[jschembs]

I can't believe this board is still talking about this dude.

[NBL0303]

The restaurant writer Jonathan Maze - evidently found that Fyre Festival of Capitalism Seeking Alpha story too and his tweet about it created quite the stir. This thread was hilarious - some of the comments about Biglari had me rolling. Here is the thread:

 

https://twitter.com/SuperMugatu/status/1124428900858253319

 

 

And here is another Jonathan Maze tweet about Biglari with a funny thread.

 

[Txvestor]

That piece was certainly comical. What surprised me was there were apparently still a lot of faithful expressing relief that the messiah had control and convinced there was a gap between inteinsic value and the current share price. I for one am glad he never got close to control over CBRL, as it would have been a $hi+storm on a much larger scale and hurt a lot more people. Kudos to CBRL management on that.

Anyone thinks this breaks to below $100 on this latest performance?

[The Investor]

From the piece:

 

"This left me with the impression that he may use shares for acquisitions at these prices. The bottom line of this was that while many shareholders believe it is undervalued – it may not be. It may be overvalued. And if that is the case, then acquisitions with these shares at these prices are a definite possibility."

 

 

This seems wrong. I think the shares are overvalued from the point of view of a  (ahem... rational) non-controlling shareholder. For the controlling shareholders the shares are undervalued, but perhaps they have no interest in correcting this, due to the massive personal gains that can be extracted from the company.

 

If they were to do an acquisition, they would be giving away their own proportional share of the assets on the cheap. That makes no sense does it?

 

I know for every great company there is a price that is so high, it's not a good investment. However, I believe the following to be false: For every bad company there is a price so low, it's a good investment.

 

At $10 per share would it still just be money down the drain? Why hasn't it gone down far more?

 

 

 

[Txvestor]

From the piece:

 

"This left me with the impression that he may use shares for acquisitions at these prices. The bottom line of this was that while many shareholders believe it is undervalued – it may not be. It may be overvalued. And if that is the case, then acquisitions with these shares at these prices are a definite possibility."

 

 

This seems wrong. I think the shares are overvalued from the point of view of a  (ahem... rational) non-controlling shareholder. For the controlling shareholders the shares are undervalued, but perhaps they have no interest in correcting this, due to the massive personal gains that can be extracted from the company.

 

If they were to do an acquisition, they would be giving away their own proportional share of the assets on the cheap. That makes no sense does it?

 

I know for every great company there is a price that is so high, it's not a good investment. However, I believe the following to be false: For every bad company there is a price so low, it's a good investment.

 

At $10 per share would it still just be money down the drain? Why hasn't it gone down far more?

 

I would argue that it hasn’t gone down further because reality has not fully set in yet. There apparently still are SB believers.

In the scenario above, the assets of the corporation are just something awaiting transfer to him personally through some devious ploy or the other or to be spent on his princely pursuits.

Under those assumptions the class B shares are just a currency, he can “print them” at his hearts content in order to draw in more assets which he can siphon if he can find a gullible taker. Since B shares do not affect control he is free to do so without risking control.

I am not sure why that is difficult to see or understand with SB.

Yet to each their own. I only follow this for the intrigue now. I consider myself lucky to have exited with a modest profit. It was a nothing investment in the end considering how long I held it but another 6months and it would have been an irretrievable disaster. Instead my move into CMG was fortunately perfectly timed.

For all those dollar cost averaging in with full faith, I hope you have a window deep into his soul.

 

[DTEJD1997]

Hey all:

 

Wow, hard to see how BH is not a zero (eventually).

 

SNS clearly has problems, BIGLY problems.  I am going to suggest that new shake machines aren't going to fix it.

 

You can get whole meals for $5.  They also have "pick two" for $4.  That is actually pretty good!  There are just a few problems with it.  The restaurant that I go to, frequently has it's drive through closed.  Sometimes this goes on all week.

 

The other problem, is how are they going to RAISE prices?  Customers have now come to expect cheap food.  Raising prices is really tough.

 

The other divisions are simply vanity projects and losing $$$.

 

Of course when you get paid what Biglari does, what does he care?  As long as he can keep the gravy train running for a few more years.

[Txvestor]

Hey all:

 

Wow, hard to see how BH is not a zero (eventually).

 

SNS clearly has problems, BIGLY problems.  I am going to suggest that new shake machines aren't going to fix it.

 

You can get whole meals for $5.  They also have "pick two" for $4.  That is actually pretty good!  There are just a few problems with it.  The restaurant that I go to, frequently has it's drive through closed.  Sometimes this goes on all week.

 

The other problem, is how are they going to RAISE prices?  Customers have now come to expect cheap food.  Raising prices is really tough.

 

The other divisions are simply vanity projects and losing $$$.

 

Of course when you get paid what Biglari does, what does he care?  As long as he can keep the gravy train running for a few more years.

 

I would also argue that as consumer discretionary income is up, people are prioritizing quality and service levels over price. That’s a real life and death issue for SnS. So what worked during the recession and early years of the recovery is not working now. The question about 3 annual meetings, 3 prescribed solutions, what credibility do you have with these milkshake machines is a cardinal one. He doesn’t have a clue, just like anyone else, he’s just trying a few things out. Raising prices is not feasible as he has no pricing power in a competitive and rapidly evolving and innovating QSR landscape.

I predict it will not work and he will eventually have to cut it loose. Hence his statement about not guaranteeing debt at the holdco level. Like I said a while ago, SnS bondholders do have reason to be sweating it.

[TwoCitiesCapital]

Hey all:

 

Wow, hard to see how BH is not a zero (eventually).

 

SNS clearly has problems, BIGLY problems.  I am going to suggest that new shake machines aren't going to fix it.

 

You can get whole meals for $5.  They also have "pick two" for $4.  That is actually pretty good!  There are just a few problems with it.  The restaurant that I go to, frequently has it's drive through closed.  Sometimes this goes on all week.

 

The other problem, is how are they going to RAISE prices?  Customers have now come to expect cheap food.  Raising prices is really tough.

 

The other divisions are simply vanity projects and losing $$$.

 

Of course when you get paid what Biglari does, what does he care?  As long as he can keep the gravy train running for a few more years.

 

I would also argue that as consumer discretionary income is up, people are prioritizing quality and service levels over price. That’s a real life and death issue for SnS. So what worked during the recession and early years of the recovery is not working now.

 

This. I moved to a city with SNS about 18 months ago. Hadn't had it since I was a kid and ate at one location.

 

The food was excellent. The price unbeatable. But the restaurant itself was dirty, the staff barely presentable, and basic manners like not yelling across the restaurant to have a conversation with your coworkers while people are eating in the restaurant seemed lost on them. It also took forever for us to order/get our food. 

 

Honestly, I'd pay twice as much for the food if the restaurants were clean and better staffed. But as of now, I don't really eat there because it wasn't a pleasant experience.

 

They also just recently closed 8 locations in the area over customer satisfaction issues. They're looking to franchise these locations, but methinks it will be difficult to find partners if this is the general perception of their locations.

[ragnarisapirate]

Seems like skin in the game is just the way to fix the problems you describe. The way they are franchising the units could be miraculous.

 

Could also fail miserably, because finding good people is hard.

[TwoCitiesCapital]

Seems like skin in the game is just the way to fix the problems you describe. The way they are franchising the units could be miraculous.

 

Could also fail miserably, because finding good people is hard.

 

Franchising only goes so far. If they're charging $4 for a meal, there's no way they're making the revenues to pay half-way decent servers/employees.

 

Tips tend to be a % of the ticket. A $5 meal is a $1 tip if patrons follow that rule thumb. I think I left $2 just because the meal was so cheap, but even $2 is nothing compared to what 20% of a $30 ticket would be.

 

No way in hell any decent server is going to go to work for SNS with that comp structure when they can work just about anywhere else and get significantly more. They need to raise their prices and franchisees don't have that control.

[ragnarisapirate]

Seems like skin in the game is just the way to fix the problems you describe. The way they are franchising the units could be miraculous.

 

Could also fail miserably, because finding good people is hard.

 

Franchising only goes so far. If they're charging $4 for a meal, there's no way they're making the revenues to pay half-way decent servers/employees.

 

Tips tend to be a % of the ticket. A $5 meal is a $1 tip if patrons follow that rule thumb. I think I left $2 just because the meal was so cheap, but even $2 is nothing compared to what 20% of a $30 ticket would be.

 

No way in hell any decent server is going to go to work for SNS with that comp structure when they can work just about anywhere else and get significantly more. They need to raise their prices and franchisees don't have that control.

 

So, he could very well be “Eddie lamperting” SNS.

[DanielGMask]

I agree with this opinion about Biglari! Image attached.

[NBL0303]

This is an excellent article someone just pointed out to me, summarizing the current state of play of Steak n Shake.

 

https://www.ibj.com/articles/73722-a-hard-to-digest-reality-steak-n-shake-might-not-make-it

 

 

[Txvestor]

To me that is a high likelihood event ie. SnS bankruptcy. He effectively was hinting at that possibility when boasting about not having the debt at the holdco level. He saddled it with debt to insure against that possibility and duped bondholders. I’d frankly be very worried if I was a SnS bondholder. He also has no other intent than to live his exorbitant lifestyle courtesy his shareholders and pay himself grotesquely(he is being generous to you all remember). If shareholders make money past that hurdle so be it(he may even be deluding himself that they could). But frankly as long as the first 2 criteria are met, the hell with the rest of it.

I am stunned that his board is not considering their legal risk here and I am not sure how he is getting away. I think one reason however is complicit shareholders.

[DTEJD1997]

Hey all:

 

It is hard for me to see how S&S does NOT go into bankruptcy.

 

The unit that I go to is now closed.

 

Perhaps even more importantly than the closures is the profitability problem.

 

Their food is indeed good.  Definitely better than McDonalds and BK.  Probably even better than Wendy's? 

I would think that they've got to pay for that quality.  How in the world can they possibly make money on $4 meals?  You get sandwich, fries, drink & side for the $4.  There is nothing left to upsell!  I've got a full meal for $4!  Can they sell 1,000 of those meals a day, every day?  I doubt it.  They've also got labor costs, occupancy, advertising, and on and on.

 

I think this thing ends in BK.

[NBL0303]

 

I think this thing ends in BK.

 

I think everyone I've spoken with about this that follows this thinks that is the case. I think it is almost unanimous that Steak n Shake is essentially already in operating bankruptcy. The title of this article says it all really - when Steak n Shake's hometown paper leads with this headline - then you know it is going down.

 

https://www.ibj.com/articles/73722-a-hard-to-digest-reality-steak-n-shake-might-not-make-it

[Hielko]

Today, Biglari, 41, a cocksure executive who scoffs at conventional corporate governance practices

Had to laugh at that one :D

[wescobrk]

Wouldn't a bankruptcy be beneficial for BH shareholders? That eliminates all the interest expense for cash to upstream to the parent. BH isn't responsible for the debt. Assuming SNS can shrink and become profitable by 2021, how is that a bad scenario?

[given2invest]

It's not.  But you're missing the bigger picture:  A BH shareholder is screwed indefinitely by Biglari.  It doesn't matter what NAV is now or in the future.  He is in control and will milk this for all he can to benefit himself.  Can't buy this at any price.

[Parsad]

Very sad!  What a great franchise and I can't believe they shuttered 60 locations...in Indianapolis, their core market!  It was running so well several years ago, when they had streamlined the menu, brought in a nominal offering of the $4 deals and franchisees were happy.  Then he took out so much debt, did everything to increase volume (but not profitability) and pissed off the franchisees.  Really sad...I loved this business!  Plundered it and killed what was a pure cash cow!  I hope he turns it around for the sake of the franchisees, employees and people who love SNS.  Cheers!

[Txvestor]

The fact that some people think this is undervalued is what is ridiculous. This is uninvestable at almost any price due to SB.

Those who were betting on the jockey, are looking pretty silly right now. Divine intervention that checks him out of this world will be a great value add right now, the odds of that are low at age 41. Value destruction and corporate malfeasance will continue apace, and shareholders will continue to be treated with contempt. I can't see anyone in their right mind, either accept BH shares in an acquistion or sell their lifes work to this guy. He can't even succeed as an activist since noone will trust him, how can anyone endorse him in a proxy battle ever again? So he is resorting to big ideas like Biglari Cafe, Milkshake machines, and cherry eliminations.

So he has rendered himself pretty useless. In many ways he is the anti-Buffett.

[sarganaga]

The fact that some people think this is undervalued is what is ridiculous. This is uninvestable at almost any price due to SB.

Those who were betting on the jockey, are looking pretty silly right now. Divine intervention that checks him out of this world will be a great value add right  now, the odds of that are low at age 41. Value destruction and corporate malfeasance will continue apace, and shareholders will continue to be treated with contempt. I can't see anyone in their right mind, either accept BH shares in an acquistion or sell their lifes work to this guy. He can't even succeed as an activist since noone will trust him, how can anyone endorse him in a proxy battle ever again? So he is resorting to big ideas like Biglari Cafe, Milkshake machines, and cherry eliminations.

So he has rendered himself pretty useless. In many ways he is the anti-Buffett.

 

I couldn't agree more. The fact that this can be done to public company shareholders illustrates how inadequate protection is for minority shareholders. The little bastard spouted Buffet, got lucky in the short run, has demonstrated how inadequate his operational abilities actually are, & continues to be able to continue to fleece shareholders.