No. of Recommendations: 14
I suppose we should close out this off topic discussion but I will offer a few thoughts on it first.
There are a lot of reasons to be critical of how Sardar treated the existing shareholders when he took over Steak n Shake. There is a big difference between having someone change the deal on you and coming around many years later and knowing the deal. On the "crook" front I will just point out that this is an SEC regulated, Deloitte & Touche audited company operating in the US legal system. I don't think they have a good or independent board of directors but it is not exactly easy to "do fraud" and steal in this framework. Again, I understand how you would feel if you were an early "believer" that thought this young punk was the second coming of Warren E. Buffett and Steak n Shake was just as shitty as New England textile mills and they were going to have the same origin story and the same birthday and the same website and the same Annual Report design and Sardar was going to do it all for free and you were in on the ground floor.
A lot of time has passed since Sardar pushed through his pay package. A shareholder coming to the company today knows the deal (or should). Sardar will be paid above his $900k salary for performance only. There are zero equity issuances or stock options. Many years pass where Sardar is not paid more than his base salary because the company was below the high water mark, didn't exceed the 6% hurdle rate, or both.
The common stockholder that is going to be screwed and stolen from owns the exact same security that Sardar and his family have (almost) their entire net worth in and a large portion of his future compensation will be tied to the performance of the common shares of his company.
Fairfax India has a similar compensation structure, the incentive fee is based on book value but shareholders can't spend book value so there is a disconnect between how the shareholders are doing and how the manager fees accrue when the shares trade at a large discount to book value for an extended period of time.
Boston Omaha of course also has a similar fee structure.
The comp. structure of Biglari Holdings for incentive bonuses is 25% of the gains above a 6% hurdle rate (not annually compounding if not met) above the previous high water mark. The comp. scheme is the same for the securities held though the hedge funds (Lion Funds) and the operating companies at the holding company level. There is no incentive to shuffle assets between the two in order to earn fees. Both are the same.
There are many valid criticisms of this fee arrangement and the independence of the board of directors (who basically own no stock). But a potential shareholder today knows the terms going in. I understand how angry it would make someone who had the deal changed on them. I know quite a few people who feel / felt that way.
Much of the other "lore" on what a scammer he is stemmed from policies he put in place to get and keep control of the company. The name licensing fee was just a novel poison pill. No money was paid. The license scheme was terminated. He has control of the company (using the company's money - he does not personally own a controlling voting interest, his hedge fund with company capital does).
His hedge funds are well below their high water marks and a lot of money will have to be made before he earns incentive reallocations there. The operating company results have improved enough to pay him a bonus for year-end 2023, which he was just paid.
He has continued to buy common shares for the hedge fund, which the company owns a high 80's percent of. This buying is basically the only liquidity in the stock and the shares are very difficult to buy and sell. The A-shares can go for a week or more without trading. 72% of the A-shares are owned by the Lion Fund & Biglari Capital (the GP).
https://www.dataroma.com/m/ins/ins.php?t=y&&sym=BH...If he is going to commit a bunch of fraud on the common shareholders, he sure owns a lot of that security himself.
Like I said earlier - this is an easy pass for 99% of all investors. That is the only reason it is routinely available at less than a $215 million valuation.
