BH - Biglari Holdings

[rkbabang]

 

Lol. Couldn’t have happened to a nicer guy.

 

I actually don't really know if he is a nice guy or not, it is just about his public actions as a CEO to me.

 

One thing about this and how toxic Sardar's reputation has been for a long time - Sardar really just thinks it doesn't matter. I don't believe that is the case - because they want to be an acquirer and Sardar's reputation will greatly hinder their ability to do acquisitions - I mean who would want to sell their business to him unless he was paying a pretty penny? But in some sense Sardar is right - in the current time there is so much news and information thrown at people, no one will really remember except for us. Now it is a funny store for a few days, but this level of corporate malfeasance should really become infamous like Enron - yet, it is hard for almost anything to be remembered now. An ardent Trump supporter told me this early in his political life a few years ago - she said that the media and the left were coming after him so hard everyday with all manner of complaints, accusations, allegations, etc. that it kind of actually helps him with his core supporters in the sense that no specific allegation/issue against will ever stick because there are so many thrown out daily that it all just kind of blends. With the Sardar situation, yes his reputation is shot, but it barely matters now in a sense because everyone moves on from story to story so fast.

 

He will never get the attention Enron received because BH is a microcap, soon to be nanocap.  If BH was once a $200B company and he drove it into the ground for his own personal profit they would already be filming a Netflix original movie about it.

 

[Spekulatius]

He won't buyback stock because the stock and capital of the company is effectively "permanent capital" to him and he can eat the fees for decades to come.  He doesn't care about the NAV gap though he'd prefer if it didn't exist. 

 

It's not different than a BDC where the sponsor doesn't want to buyback stock at a discount.  It shrinks their fee base!

 

There is no point in buying back stock, because he control and “owns” the assets already. It‘s the  ultimate value trap. Except for the possibility of Devine Intervention ( as has been pointed out before), the stock is a zero for all but Mr Big. I honestly wouldn’t be surprised, if he issued more deeply discounted stock, to suck more assets into the orbit of his Biglari black hole.

[Ballinvarosig Investors]

What a train wreck!

 

"At a past annual meeting I said, quit bidding our share price up. And everyone laughed.” Then he leaned into the microphone, looked out at shareholders, who lost 58% of the value of their stock in 2018, and said, with delight: “Who’s laughing now?”"

Share price now under $100.

 

Bigs must be thrilled.

[shalab]

Don't think he cares for the average shareholder. The thing he will care about is moving money from BH to his account; the lower stock price makes it easier. If they pay him 10mm per year (and it is carried interest, i.e., transfer of assets), he ends up owning a bigger chunk of the company more quickly. It is that simple. Meanwhile BH will pay for his lifestyle expenses (planes and other) with G&A expenses

 

What a train wreck!

 

"At a past annual meeting I said, quit bidding our share price up. And everyone laughed.” Then he leaned into the microphone, looked out at shareholders, who lost 58% of the value of their stock in 2018, and said, with delight: “Who’s laughing now?”"

Share price now under $100.

 

Bigs must be thrilled.

[given2invest]

Don't think he cares for the average shareholder. The thing he will care about is moving money from BH to his account; the lower stock price makes it easier. If they pay him 10mm per year (and it is carried interest, i.e., transfer of assets), he ends up owning a bigger chunk of the company more quickly. It is that simple. Meanwhile BH will pay for his lifestyle expenses (planes and other) with G&A expenses

 

What a train wreck!

 

"At a past annual meeting I said, quit bidding our share price up. And everyone laughed.” Then he leaned into the microphone, looked out at shareholders, who lost 58% of the value of their stock in 2018, and said, with delight: “Who’s laughing now?”"

Share price now under $100.

 

Bigs must be thrilled.

 

Agree w/ this 100%.  He prob sees the lower share price and licks his lips at ways to make more $ for himself.  One might help all shareholders (buyback), but most will not.  And he doesn't want to buyback stock because it shrinks his permanent capital base. 

 

There is no price I would buy this stock.

[gfp]

https://www.sec.gov/Archives/edgar/data/1334426/000092189519001627/xslF345X03/form407428007_05222019.xml

 

What a train wreck!

 

"At a past annual meeting I said, quit bidding our share price up. And everyone laughed.” Then he leaned into the microphone, looked out at shareholders, who lost 58% of the value of their stock in 2018, and said, with delight: “Who’s laughing now?”"

Share price now under $100.

 

Bigs must be thrilled.

[given2invest]

If I controlled a closed end company that traded at a 50% discount to NAV or whatever I would buy stock personally, too.  But you're just stealing from yourself at some point.

[Txvestor]

If I controlled a closed end company that traded at a 50% discount to NAV or whatever I would buy stock personally, too.  But you're just stealing from yourself at some point.

 

If he was taking $20M compensation for shifty performance and buying up beaten stock for a low price, and recycling each year, eventually he will own the company outright. He has many options to transfer the economic interests to himself. He can pay himself, make money on the hedge fund, take generous corporate perks and have lavish idiot pet projects etc. bottom line he don’t consider shareholders partners, he considers them his chumps.

[given2invest]

If I controlled a closed end company that traded at a 50% discount to NAV or whatever I would buy stock personally, too.  But you're just stealing from yourself at some point.

 

If he was taking $20M compensation for shifty performance and buying up beaten stock for a low price, and recycling each year, eventually he will own the company outright. He has many options to transfer the economic interests to himself. He can pay himself, make money on the hedge fund, take generous corporate perks and have lavish idiot pet projects etc. bottom line he don’t consider shareholders partners, he considers them his chumps.

 

anyone who thinks otherwise is crazy.  but i don't think anyone thinks otherwise.  i think they think at some price it's worth the risk because he will try to get the stock back to NAV for reputation.  good luck with that ever happening.

[Txvestor]

If I controlled a closed end company that traded at a 50% discount to NAV or whatever I would buy stock personally, too.  But you're just stealing from yourself at some point.

 

If he was taking $20M compensation for shifty performance and buying up beaten stock for a low price, and recycling each year, eventually he will own the company outright. He has many options to transfer the economic interests to himself. He can pay himself, make money on the hedge fund, take generous corporate perks and have lavish idiot pet projects etc. bottom line he don’t consider shareholders partners, he considers them his chumps.

 

anyone who thinks otherwise is crazy.  but i don't think anyone thinks otherwise.  i think they think at some price it's worth the risk because he will try to get the stock back to NAV for reputation.  good luck with that ever happening.

 

Sometime last year NBL asked a question on this forum, is there any price at which you will buy BH common stock. I thought about it and said to myself, well maybe at under $100, one can think about it. Having seen the shenenigans, the freefall at Steak-n-shake, ongoing idiot pet projects and the number of levers of transfer of economic interest he has. I can only think anyone betting in BH is betting on divine intervention for potential salvage.

[DTEJD1997]

Hey all:

 

I spoke with some people who ate at/knew people working at one of the Steak & Shakes that was closed.

 

Evidently, it was simply shut down at the end of a shift and everybody was let go.  No advance warning, no nothing.  I don't know if this was in compliance with labor laws? 

 

Seems like a pretty bad thing to do to the workers. 

 

IF that is true, it is going to make it even harder to re-open at some future point.  Help is hard to find.  Good help is incredibly difficult to find.  With antics like this, who would work at S&S?  There are PLENTY of places to work at these days.

 

[NBL0303]

 

IF that is true, it is going to make it even harder to re-open at some future point.

 

These stores are never re-opening. Everyone knows that. Even Sardar said they're only going to have 60-80 of them at year-end. I literally do not think that anyone who follows this thinks these stores have any shot at re-opening.

[gfp]

Apart from the term loan, are the majority of closed restaurants' underlying real estate owned free and clear?  NBL, do you remember if the scuttled high yield bond issue that SnS considered last year was also non-recourse to Holdings?

 

 

IF that is true, it is going to make it even harder to re-open at some future point.

 

These stores are never re-opening. Everyone knows that. Even Sardar said they're only going to have 60-80 of them at year-end. I literally do not think that anyone who follows this thinks these stores have any shot at re-opening.

[Foreign Tuffett]

Some good info on employee lawsuits and store closings:

 

 

https://www.wglt.org/post/85-years-after-founding-normal-challenges-put-steak-n-shake-brink

[DTEJD1997]

Hey all:

 

Drove by the SNS that I used to eat at yesterday.

 

Almost all the signage is down, drive through menus & promotional signs in windows are gone.  Only signage is on/physically built into the building and the sign at the street.

 

Looks like this is long term mothballing.  Others who says most closed locations will never re-open are probably right.

[NBL0303]

Hey all:

 

Drove by the SNS that I used to eat at yesterday.

 

Almost all the signage is down, drive through menus & promotional signs in windows are gone.  Only signage is on/physically built into the building and the sign at the street.

 

Looks like this is long term mothballing.  Others who says most closed locations will never re-open are probably right.

 

Well over 100 locations closed down now. Which I've heard some others argue is actually a good thing. Of course, if the company (read: Sardar Biglari) has the silly conceit that these stores could possibly re-open at some point and spends a significant amount of money aiming towards that - that is one way trouble could come.

[Parsad]

For our tax specialist friends out there, if Biglari sells 400 restaurants for $10K each...which is only $4M...can he write off the $250M+ loss in Plant & Property against the gains in Cracker Barrel?

 

If so, on paper BH takes a big loss on the sale of the stores, but they gain on the taxes they would have had to pay if they sold CRBL...and their income will increase dramatically from the new profit-sharing structure.

 

Cheers!

[gfp]

I doubt it, at least as described.  You don't become the actual owner of property under the $10k deal.  You don't own much at all really.

 

For our tax specialist friends out there, if Biglari sells 400 restaurants for $10K each...which is only $4M...can he write off the $250M+ loss in Plant & Property against the gains in Cracker Barrel?

 

If so, on paper BH takes a big loss on the sale of the stores, but they gain on the taxes they would have had to pay if they sold CRBL...and their income will increase dramatically from the new profit-sharing structure.

 

Cheers!

[Foreign Tuffett]

I doubt it, at least as described.  You don't become the actual owner of property under the $10k deal.  You don't own much at all really.

 

For our tax specialist friends out there, if Biglari sells 400 restaurants for $10K each...which is only $4M...can he write off the $250M+ loss in Plant & Property against the gains in Cracker Barrel?

 

If so, on paper BH takes a big loss on the sale of the stores, but they gain on the taxes they would have had to pay if they sold CRBL...and their income will increase dramatically from the new profit-sharing structure.

 

Cheers!

 

I agree with gfp. I think it's more of a "buying yourself a job" type of deal.

 

[OracleofCarolina]

S&P warns "elevated likelihood" that Steak 'n Shake, with over 600 locations, "will be unable to meet its near-term interest and principal obligations (with the next $5 million interest payment due in September 2019)," downgrades burger chain deep into junk to "CCC-" rating.

[Parsad]

S&P warns "elevated likelihood" that Steak 'n Shake, with over 600 locations, "will be unable to meet its near-term interest and principal obligations (with the next $5 million interest payment due in September 2019)," downgrades burger chain deep into junk to "CCC-" rating.

 

How is that possible with millions and millions sitting in Cracker Barrel that Sardar could lend or inject as equity into SNS?  I'm assuming the analyst is looking at SNS as a stand-alone entity.  Does he think that Sardar would let SNS go bankrupt without pulling as much cash as he can out of the chain...such as selling the whole business first?  Cheers!

[Tim Eriksen]

S&P warns "elevated likelihood" that Steak 'n Shake, with over 600 locations, "will be unable to meet its near-term interest and principal obligations (with the next $5 million interest payment due in September 2019)," downgrades burger chain deep into junk to "CCC-" rating.

 

How is that possible with millions and millions sitting in Cracker Barrel that Sardar could lend or inject as equity into SNS?  I'm assuming the analyst is looking at SNS as a stand-alone entity.  Does he think that Sardar would let SNS go bankrupt without pulling as much cash as he can out of the chain...such as selling the whole business first?  Cheers!

Easy.  It is non recourse.  Why would he inject equity only to have it go out the door as interest payments or operating losses?  SNS is bleeding cash.  Q1 was brutal.

What is a money losing restaurant chain with high debt levels that is rapidly closing stores worth?  The answer could be less than zero.

[Foreign Tuffett]

S&P warns "elevated likelihood" that Steak 'n Shake, with over 600 locations, "will be unable to meet its near-term interest and principal obligations (with the next $5 million interest payment due in September 2019)," downgrades burger chain deep into junk to "CCC-" rating.

 

How is that possible with millions and millions sitting in Cracker Barrel that Sardar could lend or inject as equity into SNS?  I'm assuming the analyst is looking at SNS as a stand-alone entity.  Does he think that Sardar would let SNS go bankrupt without pulling as much cash as he can out of the chain...such as selling the whole business first?  Cheers!

Easy.  It is non recourse.  Why would he inject equity only to have it go out the door as interest payments or operating losses?  SNS is bleeding cash.  Q1 was brutal.

What is a money losing restaurant chain with high debt levels that is rapidly closing stores worth?  The answer could be less than zero.

 

I agree with Tim here. Sardar has consistently mentioned over the years that this debt is non recourse to the corporate parent.

 

Steak n Shake right now is a binary situation in that it's worth little in its current state, but could be quite valuable if turned around. 

[Parsad]

I just find it hard to believe he's going to pull a Lampert here...not hard to believe...but a waste of a terrific brand and restaurant.  Cheers!

[Orchard]

yeah it's like saying that a LBO could go bankrupt. The PE fund always has more money so how could a PE owned business ever go bankrupt.