Inelegant Investor

In the latest step in his effort to mimic Warren Buffett, Sardar Biglari of Biglari Holdings(BH) has proposed to create a new, non-voting class of shares, which existing class A shares could be converted to at a rate of somewhere between 20 to 1 and 50 to 1. The disclosure came in an otherwise unremarkable 8-K filed this morning detailing items to be voted on at the upcoming annual meeting of shareholders.

The proposal to divide the Company’s common stock into two classes would stipulate that the existing common stock be re-designated as Class A Common Stock, whose rights, powers and privileges would remain the same, except as described in the remainder of this paragraph.  The proposal would create a new class of non-voting, non-convertible Class B Common Stock.  It is further anticipated that the Class A Common Stock would be convertible into as few as 20 and as many as 50 shares of the Class B Common Stock.  The full terms of the Class A and Class B Common Stock will be described in the proxy statement accompanying the Annual Meeting. These terms are subject to the approval of the Company’s stockholders and the New York Stock Exchange.

Mr. Biglari has previously taken steps to copy Berkshire Hathaway, including a company name with the same initials, identical annual report design, similar corporate website, reverse split to create higher share price, and dogged pursuit of an auto insurance carrier.  Beyond window dressing, the move is likely intended to consolidate Biglari’s power as shares not under his control convert over time. Class B share may also create a currency for transactions that will not dilute Mr. Biglari’s vote.

Disclosure: The author owns shares of both BH and BRKB