ragu Posted June 12, 2013 Share Posted June 12, 2013 I agree with premfan - this thread is dead. GrizzlyRock, Sorry you feel that way. In the interest of thread resuscitation - and hopefully some learning, I'd like to offer some thoughts on your write-up (I've been meaning to for a while). FWIW, I'm in agreement in with your conclusion, but not with most of the reasoning. I'll start with the one that stands out the most. You come up with a then-current price/book ratio of 1.5 (we'll set aside an issue with this calculation for now, which will likely reduce the size of the error, but not eliminate it). Yet, in your liquidation value analysis, you estimate that BH was selling essentially at liquidation value. Given that your liquidation value analysis discounts the value of certain assets, this is a mathematical impossibility. What are you missing? Best, Ragu Link to comment Share on other sites More sharing options...
cogitator99 Posted July 9, 2013 Share Posted July 9, 2013 Anyone have recent thoughts on the company after CBRL's rise? Link to comment Share on other sites More sharing options...
TheValueDude Posted July 25, 2013 Share Posted July 25, 2013 Anybody want to help me make sense of the most recent SEC filing http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9406804-1120-194920&type=sect&TabIndex=2&companyid=11049&ppu=%252fdefault.aspx%253fsym%253dBH (7/19)? Looks like he's doing a rights offering trying to raise $75mm. Then it goes into how he's restructured the arrangement with The Lion Fund and sold Biglari Capital to himself... Also, how does http://www.mysanantonio.com/business/local/article/Biglari-funds-raise-combined-415M-4668659.php fit in with all this? Anybody keeping up with it have thoughts? Link to comment Share on other sites More sharing options...
wescobrk Posted July 25, 2013 Share Posted July 25, 2013 It's a bit cumbersome to go through it all. BH gave about 350 million to the lion fund which Sardar owns and bh is now a limited partner. I'm still not clear if he still gets the 10.9 million for running Bh and if it exceeds book value. If this is converted to a franchise for steak n shake instead of company owned primarily the roe will soar and he'll earn 11 million every year. If the cap is removed he'll earn a lot more than that. It looks like he'll earn about 15 million ballpark if he earns close to 20 percent in year 1 for the lion funds since it's about 415 million. So close to 26 million and more each year and a lot more if converts steak n shake all to franchise instead of company owned Link to comment Share on other sites More sharing options...
gg Posted August 6, 2013 Share Posted August 6, 2013 Filings about BH's rights offering just released - http://edgar.sec.gov/Archives/edgar/data/93859/000092189513001537/ex991to8k07428_08062013.htm Link to comment Share on other sites More sharing options...
kh812000 Posted August 6, 2013 Share Posted August 6, 2013 Seems like a steal. $265 strike vs $428. Even at $428 is a 50c dollar considering 50mm FCF from restaurant ops and 20% stake in CRBL.... Why is this stock trading so cheap? Link to comment Share on other sites More sharing options...
Parsad Posted August 6, 2013 Share Posted August 6, 2013 Good way to raise capital. Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy. Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book. But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea. That's when I first became a shareholder...about 6-7 months before they did this. I have no clue why more companies don't do this! Cheers! Link to comment Share on other sites More sharing options...
OracleofCarolina Posted August 6, 2013 Share Posted August 6, 2013 any thoughts on what BH will do with the capital raised? My guess is a small, boring insurance company with excellent underwriting...maybe the rest of UNAM? Link to comment Share on other sites More sharing options...
Guest wellmont Posted August 6, 2013 Share Posted August 6, 2013 Good way to raise capital. Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy. Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book. But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea. That's when I first became a shareholder...about 6-7 months before they did this. I have no clue why more companies don't do this! Cheers! it tends to be used by savvy capital allocators as a way to increase their grip on the company. Link to comment Share on other sites More sharing options...
gg Posted August 6, 2013 Share Posted August 6, 2013 My understanding after reading: 3 possible outcomes: 1) you don't subscribe = you lose because you just subsidized others' purchases 2) you subscribe, and everyone else subscribes = you are in a similar position as when this started but with larger exposure to BH 3) you subscribe and others don't subscribe and you then purchase those additional discounted shares = you win because non-subscribers just subsidized your purchases (From 8-K - "Shareholders...will also be entitled to subscribe for and purchase additional shares of common stock not purchased by other Rights holders") The real opportunity seems to be scenario #3; if other investors decline participation in the transfer right, and then you hope to subscribe for, and get to purchase, those additional shares that were declined by other investors for the largely discounted price. Seems like a way of not just raising capital, but also a way to shift the investor base towards those shareholders that are more aligned with Biglari's longer-term plans (at the expense of those shareholders who are less willing/able to increase their financial exposure to BH). No commentary here on the pros or cons of this sort of deal, just trying to make sure I understand it. And to that point, this is my understanding of the filing after one reading--I'd be interested to hear from others if I am missing something. Link to comment Share on other sites More sharing options...
wescobrk Posted August 6, 2013 Share Posted August 6, 2013 any thoughts on what BH will do with the capital raised? My guess is a small, boring insurance company with excellent underwriting...maybe the rest of UNAM? I agree Link to comment Share on other sites More sharing options...
Parsad Posted August 6, 2013 Share Posted August 6, 2013 Good way to raise capital. Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy. Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book. But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea. That's when I first became a shareholder...about 6-7 months before they did this. I have no clue why more companies don't do this! Cheers! it tends to be used by savvy capital allocators as a way to increase their grip on the company. Only if you have owners who do not subscribe. It tends to increase ownership of anyone who subscribes and also purchases the maximum they can in the over-allotment from left-over unsubscribed units...not just any single shareholder. Cheers! Link to comment Share on other sites More sharing options...
rkbabang Posted August 7, 2013 Share Posted August 7, 2013 Good way to raise capital. Doesn't cost much and you've incentivized your existing shareholder base to subscribe and buy. Only problem is for those shareholders that do not have the capital to buy the shares...they get diluted heavily, since the exercise price is well under book. But, usually the other shareholders will buy the unexercised warrants and you maintain your shareholder base, while raising the funds you need without the massive investment bank fees. Jon and Sardar did this back at Western Sizzlin and it was a brilliant idea. That's when I first became a shareholder...about 6-7 months before they did this. I have no clue why more companies don't do this! Cheers! They did this more than once with Wester Sizzlin, I remember participating in this type of rights offering at least twice. *EDIT: I may be wrong about that. I tried to look up the dates in my records and only found one in November of 2007. I'm not sure why I thought I remembered another one. Maybe I was thinking of something else. Link to comment Share on other sites More sharing options...
GrizzlyRock Posted August 7, 2013 Share Posted August 7, 2013 Why is this stock trading so cheap? Because Sardar figured a nefarious way around his payment cap... I bet he has a target in mind / LOI signed for the ~$76 million Link to comment Share on other sites More sharing options...
Guest wellmont Posted August 7, 2013 Share Posted August 7, 2013 Only if you have owners who do not subscribe. It tends to increase ownership of anyone who subscribes and also purchases the maximum they can in the over-allotment from left-over unsubscribed units...not just any single shareholder. Cheers! but lots of owners don't subscribe. which is a well known fact by savvy allocators like Greenblatt, Price, Lampert, Malone, Ashner, Gabelli, Biglari. He will oversubscribe and increase his grip on bh at a discount. in fact just a cursory reading of this plan reveals that over subscription privileges here are not transferable. if I have that correct, if you sell your rights the person buying them can't oversubscribe. less competition. I was in a rights offering where I was able to double my position (via over subscription) in a company at $4.50 and a few weeks later the stock is over $6. cheers! Link to comment Share on other sites More sharing options...
Parsad Posted August 7, 2013 Share Posted August 7, 2013 if I have that correct, if you sell your rights the person buying them can't oversubscribe. less competition. Wouldn't that mean that Biglari can't over subscribe as well? If you own 2% and he owns 15%, then the two of you would both increase your ownership the same on an overall percentage basis, if you both maxed out on your own shares and any excess warrants you could purchase. Correct? Cheers! Link to comment Share on other sites More sharing options...
Guest wellmont Posted August 7, 2013 Share Posted August 7, 2013 if I have that correct, if you sell your rights the person buying them can't oversubscribe. less competition. Wouldn't that mean that Biglari can't over subscribe as well? If you own 2% and he owns 15%, then the two of you would both increase your ownership the same on an overall percentage basis, if you both maxed out on your own shares and any excess warrants you could purchase. Correct? Cheers! you lose over subscription privileges only if you sell your rights. I could be wrong. you are correct and I agree with your point. each shareholder has the same rights. some shareholders don't understand them or can't be bothered. rich get richer. :) however, if someone has a grip on a company, he can increase his grip by oversubscribing. I can increase my ownership as well. but I don't have a grip (control) and won't, even if I increase my stake. Malone famously got control of Liberty via a complex rights offering where he oversubscribed, when most shareholders were asleep at the wheel. cheers! Link to comment Share on other sites More sharing options...
giofranchi Posted August 7, 2013 Share Posted August 7, 2013 I have doubled my firm's investment in BH today. And I will buy as many shares at $265 as possible! giofranchi Link to comment Share on other sites More sharing options...
Guest wellmont Posted August 7, 2013 Share Posted August 7, 2013 I have doubled my firm's investment in BH today. And I will buy as many shares at $265 as possible! giofranchi do you know when the record date is for participation? thanks. Link to comment Share on other sites More sharing options...
gg Posted August 7, 2013 Share Posted August 7, 2013 And I will buy as many shares at $265 as possible! giofranchi That's only going to be beneficial in the "oversubscription privilege", so it's ultimately a bet on other shareholders not exercising their option. Any idea what level participation this type of deal usually attracts? Link to comment Share on other sites More sharing options...
gg Posted August 7, 2013 Share Posted August 7, 2013 do you know when the record date is for participation? thanks. "The Rights are expected to trade “when issued” on the NYSE beginning on August 22, 2013, and shares of common stock of the Company are expected to trade “ex-Rights” on August 23, 2013. The Rights are expected to begin trading for normal settlement on the NYSE on or about August 29, 2013 and continue through the opening of trading on the expiration date." Link to comment Share on other sites More sharing options...
giofranchi Posted August 7, 2013 Share Posted August 7, 2013 And I will buy as many shares at $265 as possible! giofranchi That's only going to be beneficial in the "oversubscription privilege", so it's ultimately a bet on other shareholders not exercising their option. Any idea what level participation this type of deal usually attracts? No, I am not sure... But, the way I see it, 1) BH already is cheap, 2) Mr. Biglari wouldn't do such a thing, if he hadn't the opportunity to use the new capital in an equity and earnings per share accreative way. If 1) and 2) are true, you basically get the rights to buy deeply undervalued shares for free. And, if you are lucky, you can buy more due to undersubsciption. You must be a shareholder by August 27 to receive the rights. giofranchi Link to comment Share on other sites More sharing options...
gg Posted August 7, 2013 Share Posted August 7, 2013 The math looks like this: Outstanding shares: 1.435 million Book value ( accounting for tax liability): ~400 million New book value: ~760 million New book value per share: ~$265.00 Current market cap: ~$615 million I don't understand where you are getting "new book value" from. My understanding of the valuation is below -- I assume there is no additional value being created in this situation aside from the increase in cash balance, and that the market values that additional cash on a dollar for dollar basis. Pre-Offering share price 428 old # shares 1,433,783 mkt cap 613,659,124 =(428*1,433,783) Post offering # new shares 286,756.60 =(old # shrs / 5) # total shares 1,720,540 =(old # shrs + new shrs) new cash 75,990,499 =(new shrs * 265) new mkt cap 689,649,623 =(old mkt cap + new cash) new share price 401 =(new mkt cap / new shares) Link to comment Share on other sites More sharing options...
OracleofCarolina Posted August 7, 2013 Share Posted August 7, 2013 I am with you gg....it's a wash Link to comment Share on other sites More sharing options...
Guest wellmont Posted August 7, 2013 Share Posted August 7, 2013 I am with you gg....it's a wash unless you oversubscribe and get some shares. Link to comment Share on other sites More sharing options...
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