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Biglari and corporate pyramiding


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I was re-reading chapter 48 in security analysis. It discusses corporate pyramiding and I think it is relevant to Biglari as well.


The security analysis book discusses "Van Sweringen Pyramid" - which started with control of the relatively unimportant railroad and then rapidly developed into a far flung railroad. The characteristics of this scheme from the 30's is similar to the one Biglari is deploying.


1. Form a private corporation to acquire control.

2. Use resources from one controlled railroad to acquire control of others.

3. Formation of a holding company to contrl an individual road with sale of holding companies securities to the public

4. Formation of a general holding company to acquire control of unrelated businesses.


All this while the Van Sweringens held relatively small equity or financial interest in the capital of the enterprises controlled.


Biglari has been doing the same with about 2% personal stake in Biglari Holdings. The difference from the "Van Sweringen Pyramid" is the compensation scheme.

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