Steak n Shake plans 20-1 reverse stock split

The Steak n Shake Co., in an unusual gambit, plans to initiate a reverse stock split that would reduce its number of shares
outstanding from almost 29 million to just 1.4 million and boost its per-share price from roughly $12 to $240.

The
Indianapolis-based restaurant chain announced the 20-for-1 reverse split Monday afternoon in a shareholder letter from Sardar
Biglari, the 32-year-old CEO who models his moves after the legendary investor Warren Buffett.

Biglari has transformed
Steak n Shake into a holding company, ala Buffett’s Berkshire Hathaway, and has announced plans to use the chain’s free cash
flow to make acquisitions as he pleases. Steak n Shake agreed in August to acquire the steak chain Western Sizzlin, another
Biglari holding, and has acquired a roughly 10-percent stake in a small insurer.

Now, Biglari hopes to scare off short-term
investors by raising the share price of Steak n Shake. (Buffett has famously refused to split shares in his Berkshire Hathaway
A stock, which now trades for $99,400 a share, although the B shares are available for 1/30th of the cost.)

Reverse
splits traditionally are used by struggling companies, often with share prices under $1, so they can maintain stock listings
and stay within the investment range allowed by mutual funds.

Ironically, Biglari writes in his annual letter that
the management team’s focus is on "the value of the company, not on the stock price." So why is Steak n Shake
moving to artificially raise its stock price?

"We are seeking to assemble and align ourselves with long-term investors
whose purpose is to prosper in concert with the company," Biglari wrote. "The change, we hope, will dissuade speculators
from participating in our stock."

The letter accompanied the chain’s annual and quarterly earnings reports. The
company reported a quarterly profit of $3.4 million, or 12 cents per diluted share, for the period ended
Sept. 30. That compares to a loss of $9.2 million, or 32 cents per diluted share, during the same period
last year. Fourth-quarter revenue rose to $158.6 million from $138.9 million a year ago.

The company said quarterly
customer traffic rose 20 percent and same-store sales were up 10 percent.

For the year, Steak
n Shake earned $6 million on revenue of $627 million, a major improvement over the $23-million loss the
company reported for fiscal 2008.

Biglari, who does not hold conference calls with Wall Street
analyst or return media phone calls, described the chain’s turnaround as "miraculous".

"To engineer
our turnaround required drastic changes in strategy, operations and culture," he wrote. "Otherwise, Steak n
Shake would have devolved into a footnote in the history of iconic American brands."