There was an oversubscription privilege priced into each share yesterday that just expired. That should explain some of the difference in the price today.
I imagine once he got into Maxim, he didn't like what he saw and then decided to clean house. He said he has a Harvard MBA turd detector, so maybe he came across too many of those.
He addressed the new First Guard incentive structure and said that Ed will have the opportunity to make more under BH's incentive program than he did by selling the firm to BH.
With respect to SNS, he talked about the new managers he has recruited to take it to the next level. There is a person who came from Fed Ex and led a bar code project there, a distribution person who came from Advance Auto Parts, an HR person from JCP, and a person from Toyota University. It seems he's putting in place the infrastructure necessary to grow the number of restaurants.
With respect to licensing, he mentioned that in Russia, there is a Maxim branded credit card and a Maxim restaurant, which he sees as evidence that the brand can work on different products. Also, he has plans for SNS brand licensing. He talked about how successful SNS chili is in wal mart stores in florida, and how they both want to expand it to other areas. Hi also mentioned a few additional products that are planned like a microwavable shake, frozen steakburgers, etc.
I remember the Cooker!
No problem, happy to share. They talked a lot about Maxim. It is the opposite of FG in that they won't meddle with FG and will allow old mgmt to continue running the business profitably, but they already fired all of maxim's mgmt and SB will now run it at a loss. They talked about how it has great potential to generate licensing revenue, similar to playboy, but also how they intend to make it more high brow, and made it clear that the playboy analogy ended with licensing revenue and did not include content. SB said he inquired about Maxim after reading in the newspaper that the sale fell through on feb. 14, and agreed to buy it a couple days later. They said they have already been offered more than they paid for Maxim, but turned it down because they see great potential in the brand. The publishing biz may never be profitable, but is a giant banner ad for the brand, off which they hope to make licensing revenue off products like booze, etc. Maxim is taking up a lot of SB's time now, but he seemed excited by its prospects.
What they said about First Guard is that it's a"gem" of a business, so they jumped on the opportunity. (In the case of both First Guard and Maxim, the decision to buy was made very quickly and was not the culmination of a targeted search process that uncovered the target. Instead, with First Guard, SB said he heard about it on December 20th and two days later was meeting with the company. You get the impression, and they embrace it, that they fly by the seat of their pants and don't have a grand plan. FG is a short tail insurance company with basically no float, but underwrites profitably. They like the CEO, Ed, but he is very conservative. (The combined ratio has been under 100 for the last 15years, and in some years really low like in the 60s. They really don't intend to meddle with First Guard, and will let ed continue to do what he has been doing, except they will provide capital and backing. This will allow FG to grow and use less reinsurance. A big driver was to get an insurance company into the fold, which will give them the opportunity to learn the business and develop a rapport with regulators and rating agencies. Clearly, they are interested in a future acquisition and later, when asked about UNAM, said no comment, next question. ..
On CBRL, they compared it to the rumble in the jungle and said it is only the third round. They are undeterred by the votes and explain it away as a consequence of TSR - total shareholder return. A high TSR has made the other shareholders content with current mgmt. They will continue to fight the good fight.
I had a few laugh out loud moments where the size of his ego was on full display, like when he argued his comp structure is a bargain because other managers with his record for success would charge 2 & 20, but he is only taking 0 & 25.
They would have used some rights offering cash on the two purchases. FG didn't come cheap. They were happy to pay the asking price and said price was not negotiated much.
One of the most interesting bits of information provided at the meeting today was that Steak n Shake actually earns more float than does First Guard. This is because SNS generates float on gift cards, ($8.6 million currently) while First Guard actually has essentially no float per its business plan. Maxim is a long term project that will bleed cash for a couple years, but they see potential for a big payoff if they can leverage the brand and turn it into a licensing cash cow. SB is devoting a lot of time and energy to maxim. They are also spending money and devoting time and effort to build out the SNS franchising model and international operation, where they see a lot of opportunity, and some risk. Finally, SB and Dr. phil had a lot to say in defense of the compensation structure and transaction in which SB bought back Biglari Capital from BH, but not so much on the topic of the licensing agreement through which BH gets to use the Biglari name. They said the name Biglari caries weight when negotiating to buy a business like First Guard, but will not be used to rebrand the insurance co., and couldn't defend the 19 years of future payments to SB in the event of separation except to say it will prevent a schmuck from trying to come in and influence BH.
From Louisiana Department of Insurance:
Summary Financial Information for 2013
Net Income $1,391,286
Total Louisianan Premium $1,450,964
Total National Premium $15,656,156
I found some details on First Guard on the Arizona Insurance Commissioner website:
Financial Information as Reported for 2012
Total Liabilities $576,836
Total Capital $2,500,000
Total Surplus $14,388,897
Arizona Premium $120,758
They claim it's a profitable company, so Swollen Testicles' idol had to pay something above assets. 1.5x = $26mm. 2x = $35mm. I doubt it was more than that - too high a premium and hard to believe a higher number wouldn't have been material - thus would have required a disclosure of terms.
Actually, he made nearly twice that in 2013 after his double dip into the performance fee pool. The Lion Fund II financials have been posted to EDGAR, revealing that the jockey received a "performance reallocation" at the end of 2013 in the amount of $10.7 million. That amount was reallocated from BH's "limited partner" capital account in the fund to Sardar's "general partner" account. Thus, in 2013, the jockey made $10.9 million in salary and bonus from BH directly + another $10.7 managing corporate assets consisting solely of CBRL stock transferred to the Lion Fund II on 7/1/13 = $21.6 million. For perspective:
BH market cap $831 million jockey comp: $21.6 million
BJRI market cap $921 million CEO total comp: $4.1 million
BOBE market cap $1.2 billion CEO total comp $4.1 million
BWLD market cap $2.7 billion CEO total comp: $3.5 million
USB market cap $77 billion CEO total comp: $10.8 million
WFC market cap $259 billion CEO total comp: $19.3 million
FFX market cap $10 billion CEO total comp: $662 thousand
BRK/a market cap $304 billion CEO comp: $423 thousand
I hope he will write a blog post about his experience managing the fund. Maybe there is more to the story than simply 'Fed inflated markets operate abnormally and are tough to trade'.
I did fully subscribe and fully oversubscribed with cash. What I found out was that the allocation was done on a spreadsheet with the largest shareholders at the top of the list. They allocated the left over shares going down the list and when the shares ran out, those lower on the list may not have participated at the same rate as those at the top of the list.
I'm assuming it would be a negotiated deal. I suspect he wants to take some cash out to do another deal. The cbrl dividend is nice, but Biglari can get a better return on his investment by buying another undervalued stock, rather than sitting in a fairly valued (23 P/E) one paying a dividend at under 3% per annum. Prudence and stock buybacks rarely intersect. They can pay market price, as they would in the open market, he gets a partial cashout, they get him to agree to no more runs at the board. Loeb is an annoying hedge fund manager who had a big position in Yahoo. The company bought part of his holdings directly from him at market rates after a big runup, and he agreed to leave the board.
The other more interesting question is what does he do with his Twitter handle when this little experiment winds down? @Liquidatedmyfund?
My guess is that he is negotiating with CBRL to buy at least part of his holdings in exchange for calling off the dogs in a transaction similar to Yahoo's recent purchase of shares directly from Dan Loeb/Third Point. If he sold a portion of his shares to the company and continued to hold the rest, the stock price shouldn't tank and he would have additional cash with which to pursue his next target.
It can't go on much longer. The October month end holdings report shows assets at $1.8 mm, mostly in cash, as per usual, $300 k in index funds and 100 shares of stock. There are not enough assets to generate fees to cover expenses, so he is personally eating a fair amount of the fund's expenses. Whenever he has had enough of losing his own money is when he will throw in the towel and close up shop. Notably, his blogging has trailed off with the assets. It'll be mildly interesting to see what he winds up doing next, but this hand does seem to be played out.
I think he wants to cash out a portion of CBRL, whether through the $20 dividend, which is unlikely, or via liquidating a portion of his investment, because he has a larger target in mind than UNAM, and the $75 million he just raised through the rights offering isn't sufficient to get it done.
same as you... 100% basic, 100% oversub and had enough cash in the account to cover all shares requested. I owned all shares before record date, so that is not the problem. My broker finally said today that the transfer agent told them there was no formula and that i was lucky to get any shares of the oversubscription, as if it was a lottery. I told them that is BS and they said call BH, so I did. I called BH's controller Bruce Lewis but got VM. Apparently he forwarded my info to Morrow, the information agent who I had called on Wednesday. Someone from Morrow called me and left me a VM at the end of the day today. I will call them back tomorrow, but I expect they will again read me the part of the prospectus that says "pro rata", which of course is exactly the point. I am considering calling the class action attorney that sued BH before the rights offering, to see if they can shed some light on this charade.
I came into it with 250 shares = 250 rights, I fully subscribed and fully oversubscribed and had enough cash to cover both. The result was 50 shares per the regular sub, 5 shares per the oversub = 10% fill rate. It can't be explained by rounding, because 50*12%=6. I called the offering information agent, but they didn't know. I have asked my broker, but they don't seem to know. I sent an email to owner@steaknshake but don't really expect an answer. It seems odd to me that Phil and Cooper got filled at a higer rate than Big or the Lion Fund, and yet I got a lesser percentage than all. As stated before, I would expect a pro rata fill would mean everyone gets the same percentage. The variation seems random.
I don't get why the percentage allocation of the oversubscription would vary, other than due to rounding to whole share amounts. Shouldn't anyone partaking in the oversubscription be filled at the same rate? The prospectus says pro rata, which I understand to mean that everyone oversubscribing gets an equal allotment on a percentage basis. Most people appear to have been allocated at around 12.5%, but I got filled at 10% even though I fully subscribed and oversubscribed. I appreciate any thoughts on this before I start bugging my broker about it.
I was oversubscribed at a rate of 1 share per every 10 I subscribed to in the basic subscription in one account, and basically the same rate with the benefit of a round up to the nearest whole share in another account. In a third, I am working with the broker to rectify what I believe to be an accounting error, because as of now my account does not reflect any additional shares at all, and I should at least have been allocated shares per the basic subscription privilege. I have seen comments on other boards that people were oversubsribed at rates varying from 0 to 13.6%. Seems odd to me that the oversubscription allotments vary so much when the prospectus states it would be handled pro rata based on shares purchased through basic subscription. Now the Big question is what will he do with the $?