Though the comparisons between Biglari and Buffett are easy to spot, there are plenty of moves Biglari has made that stray from the Buffett script.
Buffett has “either bought companies outright, which allows him to make the changes that he sees necessary, or he focuses on companies that are run really well and buys a large investment stake, and then doesn’t say a word,” says Chad Brand, founder and president of Peridot Capital Management and also a shareholder with Biglari Holdings.
“If Buffett had bought Steak ‘n Shake, you can bet he would have hired an operations guy to run Steak ‘n Shake, and Buffett would have stayed in his office and looked for ways to invest the profits from Steak ‘n Shake,” Brand says. “Biglari hasn’t done that.”
Biglari has instead jumped into the everyday operations of Steak ‘n Shake, a company that was founded in 1934 by Gus Belt as a place for customers to get a premium hamburger and hand-dipped milkshake.
Some of his changes at Steak ‘n Shake have been so unlike Buffett, however, that they’ve riled up some in the investor crowd.
First, there was the 20-for-1 reverse stock split in December 2009 that sent the price of shares from about $13 to about $260, and the attempted 15-for-1 split that could have shot the price to nearly $7,000 (shareholders vetoed the latter).
Biglari claims that the reverse stock split is a way to weed out short-term-thinking shareholders.
“We will continue to strive to avidly excite the attention of blue-chip shareholders who are unfazed by near-term fluctuations in our stock or by the vagaries of the stock market,” he said in his 2010 letter. “Rather, such investors are placing their confidence in us and, like us, judge performance on the basis of long-term value creation.”
Brand, who wrote a letter to Biglari crying foul over the second reverse stock split, says the first one was a sensible move for a company trying to establish long-term success. “He’s trying to build this company up for the next 30 years, not necessarily for the next 30 days,” Brand says.
The next move that baffled some investors was a name change; in April 2010, Biglari changed the name of Steak ‘n Shake corporate to Biglari Holdings and consolidated his other brands within the company.
The final move that was quite unlike Buffett was the compensation package he proposed for himself. Although his salary was already $900,000, he proposed a deal that would pay him 25 percent of the increase in Biglari Holdings’ adjusted book value, exceeding a 6 percent hurdle rate; in other words, potentially millions of dollars a year.