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Sardar Biglari is a really, really smart guy.Back in 2007, he made millions after launching an activist campaign to gain control of Friendly's -- a campaign that culminated in the sale of the company to a private equity firm at a hefty premium.
Since then, he's taken control of Western Sizzlin and Steak n' Shake (SNS), and has ambitious plans to turn Steak n' Shake into a Warren Buffett-style holding company focused on cash flow and financial metrics.
Oh, and by the way: he's 32 years old.
He recently announced to shareholders that Steak n' Shake is planning a 1-for-20 reverse stock split that would lift the per share price from $13 to around $260. "This change, we hope, will dissuade speculators from participating in our stock," he wrote in a letter to shareholders. We are attempting to eliminate those who erroneously think that it is easier for a $10 stock to go to $20 than a $200 one to go to $400."
The New York Post referred to Biglari as a "wannabe Warren", and his annual letter definitely has the folksy tone down: he even includes coupons for free shakes for his shareholders to use and give to friends.
But is a reverse-split on the part of a CEO who insists he's not focused on the short-term stock price perhaps a bit hypocritical? Might it be better to leave the share price alone and devote the energy (and resources that go into effecting a reverse split) to managing the business instead?
It's worth noting that Buffett never did a reverse split of Berkshire Hathaway, allowing the stock to rise over time, and never bothering to split it.
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Reader Comments (Page 1 of 1)
12-17-2009 @ 6:52PM
tom said...
well just hear CVS lost 90m this month ,get out while u can,3 exec s from the pbm just resigned
1-07-2010 @ 6:15AM
ShortBus said...
I would hardly say that performing a reverse split of the shares requires great amounts of resources. So that argument is just nonsense.
Additionally, Warren Buffet never had anyone calling him the "next warren buffet", so Sidar is getting much more attention on him than Warren would have at his stage of the company.
Even though the higher share price means nothing in terms of enterprise value, it does actually mean that speculators are less likely to push the stock up and down for short term gains. So he does have a point. Who needs partners in your business who are only going to hold the stock for hours or days?