UPDATE: Steak n Shake plan makes ‘perfect sense’ to investment pro

The Steak n Shake Co.’s unusual plan to initiate a reverse stock split has the support of at least one local investment
officer, if in fact the company’s CEO is attempting to model it after Warren Buffett’s holding company, Berkshire
Hathaway.

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

“That makes
perfect sense to do, if that’s the game plan, to become a mini Berkshire Hathaway,” said Mark Foster, chief investment
officer at Columbus, Ind.-based investment advisory firm Kirr Marbach & Co.

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.

Steak n Shake’s reverse stock split
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.

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.

Steak n Shake
investors who own 20 shares now will own one. A reverse split, in this instance, will limit the amount of trading while enabling
the company to maintain its market value, Foster said.

Given that Steak n Shake shares are trading well above
the $1 threshold, Foster portrayed the move as “unprecedented.”

“Retail investors aren’t
going to spend $240 a share,” Foster said, “so it’s a move that will eliminate a lot of the retail investors
[in favor of] a lot of institutional investors.”

Biglari alluded to as much in his letter to shareholders.

“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.”

Wall Street is reacting favorably to the move. Company shares were up nearly 6 percent, to $12.50,
in late morning trading.

Biglari’s 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.