Insider Buying at Biglari Holdings

[RRJ]

Anyone can sue anyone, it's America.  But the RICO suit doesn't strike me as the way to go (though I don't know a thing about that area of the law).  This is not that kind of situation I wouldn't think.  But some selective disclosure slaps on the wrist or perhaps a serious discussion with your friendly regional regulator about market manipulation and how grey that line can be, perhaps.  Regulators would like a medium profile case like that, and they probably don't get much action in San Antonio (or wherever the regional office is), so what the hey.  And a Lerach lawsuit or two, sure.  Whether they win?  Hard to say until you get into discovery here.  In either case, they'd settle out if it was leading anywhere, so you would never hear much about it. 

 

The Gabelli statement is interesting. What's up with that?  Could it really be sharks circling in some way, or just a straightforward statement that it's too rich?  Which is intelf is rich coming from Gabelli. 

 

Or Gabelli's way of deflecting criticism from his own famously egregious pay package, or providing himself with a slight aura of defending shareholders rights?  Now I'm getting ahead of myself.  I'm sure Wall Street couldn't be that smart and cynical.  That'd be like a bad sequel to "Wall Street." 

 

 

 

 

[OracleofCarolina]

Short piece in the WSJ on Gabelli, found this quote ironic

 

"What is more, Mr. Gabelli's compensation package has been a severe drag on earnings. In 2008, Gamco's assets fell by a third and net income totaled $25 million. Even so, Mr. Gabelli received $46 million in cash compensation, 13 times as much as the second-highest-paid executive."

 

[RRJ]

If Gabelli's plan is Biglari's idea of a good compensation plan, then good luck retaining high-calibre executives as you buy these businesses.  If it's not, then he'll have to pay them all over-market amounts, and that means shareholders will have little left.

 

He's set the bar too high to achieve what he says he has set out to do.  I say this assuming that when the final compensation plan facts come out, including the all important adjustments to be made to book value according to the all-important and heretofore undisclosed "Exhibit A", it will show what I think it will, which is that this book value is not a per share calculation, and the adjustments are not enough to avoid this being a real dilution of value for shareholders.

 

Of course, with all the blowback they've received they could always revise Exhibit A before it is disclosed, to simply say "We'll adjust the book value to entirely eliminate all issuances of stock, etc. . . " (in other words make it tantamount to a book value per share calculation).  If they did that, then good for them.  But if they had intended that, then they would have said so up front, not waited until the backlash occurred. 

 

So I'm left with no choice except to figure if they didn't disclose it up front, it's because they did not want me as a shareholder to understand what was being said.  I'm a pretty strong reader and writer, so if I can't understand it, I assume they just didn't want me to.  And that is really all you need to know, isn't it? 

 

 

[investor99]

Bigliar buys more today and yesterday.  Where is he getting the money?  Must be levering up.  This guy will do anything to get his way.

 

Let's see if Gabelli buys more in the next few days or weeks. 

 

Let's also hope that Gabelli is as relentless as Bigliar.

[ragnarisapirate]

Bigliar buys more today and yesterday.  Where is he getting the money?  Must be levering up.  This guy will do anything to get his way.

 

Let's see if Gabelli buys more in the next few days or weeks. 

 

Let's also hope that Gabelli is as relentless as Bigliar.

 

Let's not jump to conclusions; we don't know that he is levering up. He could have raised more funds, been using some of his personal cash/salary (after all, he does make 900K in cash from being CEO), sold an Aston Martin/some other asset, OR be levering up.

 

If he wants to get his way, so be it- that is his right; just the same way that everyone else wants to get their way. He has done well with the company, and in my opinion will continue to do so in the future, irrespective of how much he makes. I look forward to the vote, and plan on being at the meeting. :)

 

With all that said, I am voting against the compensation agreement, since, by my back of the envelope figuring, I think it erodes more shareholder value than it creates. At the end of the day, I don't think that he is the type of guy that would sandbag shareholders over compensation.

 

[Parsad]

At the end of the day, I don't think that he is the type of guy that would sandbag shareholders over compensation.

 

Perhaps, but we are officially out after today...we don't own a single share in the funds, our corporate accounts, or our personal accounts.  Long-term gains rates have kicked in, there are other opportunities available, and the stock was around $309.  We made plenty of money for our partners and ourselves, but money isn't everything...you are only as good as your word, and when you take a $900K salary and then tell partners you are there to make money with them and not off of them, well...you've got to back that up! 

 

And then how do you explain to your executives that their efforts are as valuable as yours, when they don't share the pot?  You are creating a culture where there will be turnover in the corporate offices.  At the Lion Fund, Sardar was the man.  At Biglari Holdings, there are quite a few other people who are instrumental in running the business.  Cheers!   

[prevalou]

General Category / Archives / Re: SNS needs to address this, and fast!

 

I think we agree now about this guy

[Partner24]

you are only as good as your word, and when you take a $900K salary and then tell partners you are there to make money with them and not off of them, well...you've got to back that up!

 

That's right.

 

Talk is cheap. Like I said before, sometimes, what someone is speaks so loudly for itself that I can't hear what he's saying (or read what he wrote in his communications with the people's pocket where he wants to put deeply his fingers in shareholders) ;-)

 

Cheers!

 

 

[prevalou]

good reason to change one's mind at low cost...

[Ballinvarosig Investors]

Biglari continues buying - http://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0000093859

 

He really is trying to grab every vote he can to ensure that his compensation package passes! He now controls just over 14% of BH stock now.

 

The key to whether this passes will be the institutional investors who control 36% (as of April this year). Other than Gamco (holds 9%), we have no idea of the intentions of other large shareholders like Dimensional, Vanguard and Fidelity will do.

[Redskin212]

How is the SEC not investigating this!

[Buffeteer]

 

If the guy makes money and allocates capital well, then the stock should appreciate.

If one believes it is over valued then they should sell.  I don't own any but would at the right

price.  The guy is an amazing investor and you have to pay for talent.  Kobe isn't taking

the mid level exception!

 

I didn't think 900k was bad as he doesn't get stock options or anything like that, but

did anyone here really expect him to work for $100,000 a year? 

 

WEB didn't get rich that way either.

 

 

[Myth465]

 

If the guy makes money and allocates capital well, then the stock should appreciate.

If one believes it is over valued then they should sell.  I don't own any but would at the right

price.  The guy is an amazing investor and you have to pay for talent.  Kobe isn't taking

the mid level exception!

 

I didn't think 900k was bad as he doesn't get stock options or anything like that, but

did anyone here really expect him to work for $100,000 a year?  

 

WEB didn't get rich that way either.

 

You really are beating that Straw man down. If you dont understand what the board is turned off about by now, then I dont think you ever will (Tip - Its not about $900k or $100k, Also Kobe doesnt get 25% of all future growth of the Laker franchise. There is a different between owner and employee - both are the later).

[Buffeteer]

 

If the guy makes money and allocates capital well, then the stock should appreciate.

If one believes it is over valued then they should sell.  I don't own any but would at the right

price.  The guy is an amazing investor and you have to pay for talent.  Kobe isn't taking

the mid level exception!

 

I didn't think 900k was bad as he doesn't get stock options or anything like that, but

did anyone here really expect him to work for $100,000 a year?  

 

WEB didn't get rich that way either.

 

You really are beating that Straw man down. If you dont understand what the board is turned off about by now, then I dont think you ever will (Tip - Its not about $900k or $100k, Also Kobe doesnt get 25% of all future growth of the Laker franchise. There is a different between owner and employee - both are the later).

 

 

I think Jordan would have deserved a percentage of profits, especially if he could play for decades and the team was re-named the Chicago Air Jordans!

 

I think that new dynamic models of compensation tying long-term compensation with shareholder value are needed.  It may not be the most efficient method but its more on par than typical salary + bonus + stock options. 

 

If the guy creates a little value then he'll make less than the average CEO and if he creates a lot of value he'll make more, but so will shareholders!

How many CEO's have walked away with millions while creating no real value?

 

 

 

 

 

 

 

[Myth465]

 

If the guy makes money and allocates capital well, then the stock should appreciate.

If one believes it is over valued then they should sell.  I don't own any but would at the right

price.  The guy is an amazing investor and you have to pay for talent.  Kobe isn't taking

the mid level exception!

 

I didn't think 900k was bad as he doesn't get stock options or anything like that, but

did anyone here really expect him to work for $100,000 a year?  

 

WEB didn't get rich that way either.

 

You really are beating that Straw man down. If you dont understand what the board is turned off about by now, then I dont think you ever will (Tip - Its not about $900k or $100k, Also Kobe doesnt get 25% of all future growth of the Laker franchise. There is a different between owner and employee - both are the later).

 

 

I think Jordan would have deserved a percentage of profits, especially if he could play for decades and the team was re-named the Chicago Air Jordans!

 

I think that new dynamic models of compensation tying long-term compensation with shareholder value are needed.  It may not be the most efficient method but its more on par than typical salary + bonus + stock options.  

 

If the guy creates a little value then he'll make less than the average CEO and if he creates a lot of value he'll make more, but so will shareholders!

How many CEO's have walked away with millions while creating no real value?

 

I think your logic is deeply flawed, and hope its never adopted by Corporate America. It likely will because its an ingenious way of getting rich without doing much. Pick a metric that adds no value to the owners, then manipulate that metric and get paid. Current corporate governance sucks but your desired changes dont improve upon it. If he issues a bunch of shares to acquire companies Biglari makes out like a bandit. If he falls at everything he still gets a million a year. Where im from thats quite a bit of change and more than alot of CEOs.

 

2 wrongs (CEOs getting millions for doing nothing and this horrible comp structure) dont make a right. Also read his letters. He is nothing more than a Hypocrite and a liar. Now he is likely committing securities fraud to try to ram through his desired comp plan instead of letting the owners decide if they like it. You are essentially advocating that all companies need to be public hedge funds. How bout a guy gets stock to tie his interest to owners or even better how bout a guy buys stock?

 

Good luck, Its hard to make good deals with bad people. But thats what makes a market.

[Tim Eriksen]

Buffeteer,

 

To call Biglari an "amazing investor" is quite generous.  From what I have read he produced an average 13.6% return over the last decade.  While that is better than the indices, there are great many value investors that exceeded that over the same timeframe.  Frankly, it looks more like he bought some lousy businesses, and was probably fortunate to have it turn out well.

 

If Biglari wanted to get rich the way Buffett did, he should have stuck with this hedge fund.  There is also no getting around it, that his recent actions show poor judgement.  The FMMH offer was screwed up.  His arguments reaked of hypocrisy.  The tender offer was flat out stupid.  The timing and amount of his compensation deal is atrocious. 

 

If SNS was fixed by adjusting capex and a few other things, that does not IMO (and many others) entitle him to 25% of profits after a 5% hurdle.   

[Buffeteer]

 

Current corporate governance sucks but your desired changes dont improve upon it. If he issues a bunch of shares to acquire companies Biglari makes out like a bandit. If he falls at everything he still gets a million a year. Where im from thats quite a bit of change and more than alot of CEOs.

 

You are essentially advocating that all companies need to be public hedge funds.

 

 

There are always ways to game the system and it would be obvious if he did so.  I do think after reviewing the plan that the $1 million salary

should be a bucket that once filled he gets the overflow.  I think the hurdle rate is low, but he did give up his hedge fund that probably had some value as its been run for 10 years ( with 13.6% avg return as per Tim Erikson's post though I thought it was higher ).  The effective hurdle is probably higher, though i'm not aware of the size of the hedge fund.

 

The guy has to buy BH stock with the cash recieved anyway so its equivalent to gifting stock to him.  He will undoubtedly own a significant percentage of the outstanding shares over time if this passes, but will have a huge carrot in front of him to increase shareholder value.

 

Its a rich agreement, but as are most CEO's nowadays.  I don't own any and don't think its optimal, but its way better than most.

 

I just think this idea of comparing him to Buffet's current salary etc. is silly. 

 

 

I think anyone investing in BH is investing in a public hedge fund and basing their investment on Steak n Shake but more on his ability to allocate

money. 

 

[Parsad]

I just think this idea of comparing him to Buffet's current salary etc. is silly.

 

I agree with you on this.  I was fine with Sardar getting the $900K salary HE proposed and got.  I would have been fine if he added a bonus component at that time as well.

 

The problem I've had with this whole thing from the name change and then the new proposed compensation package is that you can't reshuffle the deck whenever you like.  That is what Sardar is doing.  He's afraid of anyone displacing him at the helm, and this is the best way he can control more of the stock over time...rename the company and create an incentive plan where he will get more in intrinsic value and ownership than he originally proposed. 

 

That is the whole problem with this thing...not the compensation package itself, but the whimsical way in which he is implementing each of these components.  Almost haphazardly, by gaining a step in reputation and then going backwards two with shareholders by some new idea.  Each step he ends up controlling more, but shreds his reputation with the loyal shareholders who were hoping to grow with him.  I respect his talent, but not the culture he is now building.  Cheers!   

 

[RRJ]

Precisely so.  My first reaction to the comp plan was that this was very much like what Buffett received for running his limited partnership.  But that's not the case because Buffett could not just issue shares to increase his comp -- he had to make the entire pie grow.  Sardar Biglari has still not told us enough to even know whether this is how it will work.  I still have not seen the all-important but never disclosed "Exhibit A" to the comp plan, which contains the critical "adjustments for stock issuances, splits, etc.".  If this exhibit were to make it look like a book value per share calculation, then this would be fine -- slightly rich, but fine.  Like a truly public version of a hedge fund. 

 

But if that were the case, then why was it not disclosed already?  Perhaps to send the stock plummeting, to be bought at a discount, and then rise again when Exhibit A is disclosed?  If that's the case ---- then that amounts to really taking advantage of shareholders, and perhaps even outright securities manipulation.

 

If Exhibit A comes out and it's not equivalent to a book value per share calculation, which I expect it won't be, then it is a charade, because he can simply keep issuing shares, diluting shareholders, but growing overall book value.  This way, he gets a lot of money, and the shareholders' holdings do not increase in value. 

 

Or perhaps it is a mix of the two? 

 

1) I have no idea, which already tells me that they do not want me to know (plenty reason not to invest with this management); and

2) Whichever scenario happens, I can no longer trust the guy to have my best interest at heart.

 

Put it another way:  if you have to think about whether you're getting screwed, you probably shouldn't be entrusting your money with someone.  Buffett is his professed role model.  Okay.  Buffett's approach is to treat Berkshire shareholders like partners, despite the corporate form.  This is not how partners treat each other.  I shouldn't have to worry about his intentions; they should be pluperfectly clear.  They aren't. 

 

 

I just think this idea of comparing him to Buffet's current salary etc. is silly.

 

I agree with you on this.  I was fine with Sardar getting the $900K salary HE proposed and got.  I would have been fine if he added a bonus component at that time as well.

 

The problem I've had with this whole thing from the name change and then the new proposed compensation package is that you can't reshuffle the deck whenever you like.  That is what Sardar is doing.  He's afraid of anyone displacing him at the helm, and this is the best way he can control more of the stock over time...rename the company and create an incentive plan where he will get more in intrinsic value and ownership than he originally proposed. 

 

That is the whole problem with this thing...not the compensation package itself, but the whimsical way in which he is implementing each of these components.  Almost haphazardly, by gaining a step in reputation and then going backwards two with shareholders by some new idea.  Each step he ends up controlling more, but shreds his reputation with the loyal shareholders who were hoping to grow with him.  I respect his talent, but not the culture he is now building.  Cheers!     

 

[ragnarisapirate]

when and where is the meeting over the agreement happening? is there even a rough estimate out yet? If Gabelli show up and they give competing speeches/presentations, I will quite literally have some popcorn!

[bargainman]

 

The problem I've had with this whole thing from the name change and then the new proposed compensation package is that you can't reshuffle the deck whenever you like.  That is what Sardar is doing.  He's afraid of anyone displacing him at the helm, and this is the best way he can control more of the stock over time...rename the company and create an incentive plan where he will get more in intrinsic value and ownership than he originally proposed. 

 

That is the whole problem with this thing...not the compensation package itself, but the whimsical way in which he is implementing each of these components.  Almost haphazardly, by gaining a step in reputation and then going backwards two with shareholders by some new idea.  Each step he ends up controlling more, but shreds his reputation with the loyal shareholders who were hoping to grow with him.  I respect his talent, but not the culture he is now building.  Cheers!     

 

 

I think the one thing that everyone can agree on, whether you're completely against the compensation agree or whether you're willing to tolerate it (I've not heard anyone enthused about it other than Sardar), is that Sardar has really messed up a good thing.  That good thing is/was his incredibly loyal shareholder base/following.  That's basically reputation and culture, and I think he's messed it up with the few bad, selfish moves(not to mention his seeming complete lack of ability to listen to any suggestions other than his own).  It will be interesting if he ever gets it back.  I doubt he ever will.  That's the problem I had with him from the start. He's an activist investor which means that he has to like the fight, by definition.  He's showing that now, except that he's fighting against the very shareholders who were loyal to him and could have been one of the best shareholder bases ever.  Now instead he's got Gabelli.  To read about Gabelli check this out:

http://money.cnn.com/magazines/fortune/fortune_archive/2006/06/26/8379985/index.htm

 

they'll make a great couple...

[shalab]

I think Biglari did a service to exiting shareholders by going on a buying binge. The service might have been unintentional but it helped many to exit with reasonable gains. I am certain many more are holding onto the shares and will vote in favor of the compensation package.

[redskin]

Isn't Steak n Shake sitting on a bunch of real estate valued at cost?  I assume a lot of this real estate was purchased many years ago and the cost is significantly lower than the current market.  Biglari could simply sell this real estate at current market prices which would increase book value.  Sardar would get paid handsomely on the increased book value even though he didn't create any value.