Biglari invests $41M in Steak n Shake parent over 2 months

Biglari

The CEO of the parent company of Steak n Shake spent $40.8 million to acquire more than 134,000 shares in May and June.

Sardar Biglari bought the shares, which represent about 10 percent of San Antonio-based Biglari Holdings Inc., through his
hedge fund, Securities and Exchange Commission filings show. He now controls about 202,000 shares, or 14 percent of the 1.4
million shares outstanding.

Biglari started buying large blocks of company stock after shares dropped from the $400 level, where they traded most of
April, to around $300 in May and June. On several trading days, Biglari’s buys make up about half the shares traded.

The price tumbled after the company announced an unusually generous compensation package for its CEO that gives him 25 percent
of the company’s book value growth above a 5-percent threshold. That’s in addition to an annual salary near $1
million.

Biglari, 32, did not respond to requests to explain the big purchases of shares in what was known until April as The Steak
n Shake Co.

The big share buys are “another patch in his quilt of interesting actions,” including launching a reverse-stock
split, renaming the company, and trying to acquire shares in an auto-parts company, said Jonathan Moreland, founder of InsiderInsights.com.

On its face, the buys would suggest Biglari believes the company’s shares are oversold because of his controversial
compensation plan. But Moreland won’t be arriving at any conclusions until other insiders also buy in large numbers.

“I would not read too much significance into this buying given the incestuous relationship between the individuals
and entities,” said Moreland, author of the book “Profit from Legal Insider Trading.” “It’s
very difficult to see the ultimate economic purpose of the transactions and given that uncertainty I would not be willing
to put my money in.”

Investor and money manager Scott Rothbort of New Jersey-based LakeView Asset Management LLC described Biglari Holdings as
“a disaster in the making” in a May post on the investing blog Seeking Alpha. Rothbort has sold short shares of
the “wannabe roll-up conglomerate.”

“Is it too late to short BH?” he wrote, rhetorically. “I believe that this stock could trade into the 100s,
especially if the chairman makes another nonsensical offer for stock of another company.”

The company in late April offered to swap its shares for a stake in Virginia-based Advance Auto Parts worth up to $65 million.
The move suggested Biglari believed shares in his company were overvalued compared to those of Advance Auto Parts, which operates
more than 3,200 stores.

But Biglari offered just a tiny premium, which disappeared when the price of his company’s shares ticked down. In June,
Biglari Holdings ended the offer without picking up any shares in the auto-parts company, saying the minimum 1.4 million shares
had not been tendered.

One large Biglari Holdings shareholder believes Biglari is snapping up more shares to ensure he can garner enough votes to
approve his pay package, after major investors protested. The shareholder did not want to be identified because he is selling
his long position in the company.

The investor thought the name-change from Steak n Shake Co. was “premature” but didn’t really hurt shareholders.
The compensation package is another story altogether—“the equivalent of changing the rules in the middle of the
game for shareholders.”

“If the measure is voted through, it immediately lops off 25 percent of future growth, most of which will come from
the Steak n Shake company at first,” the investor said. “Biglari did a great job turning Steak n Shake around,
but he certainly doesn’t deserve 25 percent of its future gains because of it.”

Biglari took over Indianapolis-based Steak n Shake Co. in a 2007 proxy fight, helped return its restaurants to profitability,
then transformed it into a holding company for a diverse range of investments.

The renamed company, which relocated its headquarters from Indianapolis to San Antonio, has moved aggressively to invest
or take over other firms, including a small Michigan insurer. The Steak n Shake restaurant operations remain in Indianapolis.•