Biglari Capital Corp., the hedge fund owned by Steak ‘n Shake owner Sardar Biglari, quietly sold some of its stock in Cracker Barrel earlier this month.
The fund sold 246,478 shares, according to a filing, in the process reducing its holdings from nearly 20% of Cracker Barrel to 18.7%.
To be sure, that’s still a hefty percentage and Biglari remains Cracker Barrel’s biggest shareholder, one with a history of running activist campaigns. But it potentially signals the start of an end to an era for both the investor and the family dining chain. It’s the first time Biglari has sold Cracker Barrel stock since he first bought shares in 2011.
Biglari is probably the most controversial executive of a publicly traded restaurant company. He started an internet service provider at the age of 18, sold it when he was 22 and then founded a hedge fund.
He used that hedge fund to take over Western Sizzlin’, which he used as a springboard to direct activist campaigns at Friendly’s and then Steak ‘n Shake. He won seats on the latter company’s board in 2008, was soon named chairman and CEO and then engineered a remarkable turnaround at the burger chain—which at one point generated 29 straight quarters of same-store sales growth.
He also renamed Steak ‘n Shake Biglari Holdings, merged it with Western Sizzlin’, and then did things such as put his picture in every Steak ‘n Shake location and rename the company “Steak ‘n Shake by Biglari.”
The name changes, by the way, earned Biglari a license agreement that would pay him royalties for years if there was a change in control at the company.
Biglari modeled his company after Warren Buffett’s Berkshire Hathaway, and in the process earned glowing stories from media such as the New York Times for his investment prowess.
In 2011, he set his sights on Cracker Barrel, when the company’s stock price was in the $40s. The Lebanon, Tenn.-based chain had been a sleepy performer on Wall Street for some time.
Biglari then started an activist campaign to get seats on the chain’s board of directors, taking the same strategy he had used at other chains—complete with a website and billboards.
Cracker Barrel had none of it. The company replaced CEO Michael Woodhouse with Sandra Cochrane and named Jim Bradford chairman. It took steps to improve sales and split reporting of its restaurant and retail sales.
Cracker Barrel won the proxy fight that year. But Biglari kept coming back, trying for seats each of the next two years, to no avail. When that didn’t work, the investor asked shareholders to approve his idea for the company to pay a special dividend. That didn’t work, either. At one point, Cracker Barrel offered to buy Biglari’s shares.
Most activist investors go away after the first failed attempt. But Biglari kept his holdings, ultimately shifting them from Biglari Holdings to his own hedge fund, under a contract with Biglari Holdings.
He stopped trying to get those seats and his company bought small insurance carriers and Maxim Magazine.
Cracker Barrel, meanwhile, did just fine without Biglari’s direct involvement.
The company under Cochrane performed remarkably in the subsequent years. In November the stock reached $185 per share.
On that alone, Biglari has made hundreds of millions. He has invested a total of $240 million into the chain. That stock just before the recent sales was worth more than $870 million.
That doesn’t count dividends, which on their own have paid Biglari Capital millions more over the years. Nearly three quarters of a billion dollars in stock price gains and paid dividends is certainly a nice consolation prize.
It’s unclear whether the sale is the start of an exit or whether Biglari simply sold some stock at a high point. In June of 2017, according to a filing, Biglari’s hedge fund created a company that took out a $200 million loan using the stock as collateral.
Biglari Holdings, meanwhile, has lost more than $23 million so far this year.
And Steak ‘n Shake has seen a tough couple of years after its run of 29 straight quarters of same-store sales growth ended in 2016. Same-store sales declined 6.9% in the third quarter and are down 4% in the first nine months of this year, for instance.