Notes from the 2008 Western Sizzlin’ Annual Meeting : Circle of Competence
Notes from the 2008 Western Sizzlin’ Annual Meeting : Circle of Competence
(via www.circleofcompetenceblog.com)
I attended the 2008 Western Sizzlin' Annual Meeting, and with help from a few other shareholders, put together a set of notes on what took place at the meeting. Enjoy!
Thanks for the great notes!
Thanks for the great notes!
Sizzlin notes
Thanks for sharing these great notes. I just finished reading them on my way to work this morning. I only have one question. Was there more to Sardar's response to the question, "Was ITEX worth it? What did you learn?" I didn't really understand the response, "Not many unsolicited share tenders in small companies."
ITEX
George,
Basically, Sardar said that it is rare to see a stock-for-stock transaction in two tiny little companies, especially a hostile deal. He enjoyed the very unusual deal. Didn't say much else re: ITEX. He wouldn't expand upon their plans for the stake, except that they are comfortable with the 9% position.
Western meeting
Let's set the record straight. Sardar did not purchase ITEX because the 98 Brokers (who are large shareholders) did not want anything to do with him or his company.
His track record speaks for itself. What is his SNS stock worth today? Try about $20 million less than he paid. WOW. That was worth it.
He spent about $245,000 on his ITEX take-over that never happened.
Sardar and Cooley (his college professor)have lost money for the "WEST" shareholders. Why? Because Western ctinues to lose money with Sardar at the helm.
Sardar is not Warren Buffett, will never be Warren Buffett, and it is an insult to Mr. Buffett to even use his name with Sardars.
Ms. Aramian is not a founding person of SNS. Correct you notes. H. Gus Belt was the founder, period. By the way, she is not a big fan of Sardar. Ask her.
Now here is a hint for Sardar on how to make a profit at SNS.
Quit trying to sell breakfast. You are not Denny's. Open the stores for lunch & dinner. Close at 12 midnight. Quit staying open 24 hours a day, with so little income. Go back to curb-side service. (That's what SNS did in the old days before you were born).
Last but not least. HIRE A CEO. YOU ARE NOT THE PERSON TO BE RUNNING SNS AT ALL!!!!!
I disagree that Sue Aramian
ITEX didn't work out for whatever reason it didn't work out. If I was an ITEX shareholder, I might not have accepted either, but Sardar's offer was in the interest of WEST shareholders, whom he has a fiduciary responsbility to, not the ITEX shareholders.
I disagree that Sue Aramian is not a big fan of Sardar. I don't believe, by your tone, that you attended the meeting. If you had, you would have heard some very, very, nice comments about Sardar from Ms. Aramian. If she doesn't like him, she is sure a terrific liar. I'm not sure, though, why she would have joined Sardar's 13D group and joined him at the WEST meeting if she did not like him. Seems like a waste of time to me, and a disingenious representation of her true feelings. If the label "founder" is incorrect, I apologize.
Sardar just became Chairman about 2 weeks ago, and I believe his number 1 goal right now is finding a CEO, he said as much at the meeting. That was the one thing he harped on most, finding leadership for the company. If you're upset that he hasn't found a CEO in a couple of weeks, I think that's pretty unfair. Sardar came flat out and said he'd not like to run SNS, and that he'd prefer to be allocating capital for WEST and the Lion Fund. He's running the place out of necessity right now.
You also cannot judge the success or failure of the SNS on a temporary basis, by the stock price right now. You can give a fair judgment when some years have passed or the investment is completed. He didn't invest with a 9 month horizon, I promise you that much. If it ends up that he loses $20mm for WEST shareholders when its all said and done, it will be fair to call the investment a big failure. I'm not ready to do that less than a year in and a few weeks into his Chairmanship.
Lastly, Sardar never compared himself to Buffett, I just want to point that out. The comparison has been made by myself and others. The comparison is not that he will be nearly as successful, but that his methods and way of thinking are similar, which I believe they are.
If you don't think Sardar can be successful, just don't own the stock. He's a smart guy running a company for the sole benefit of the shareholders, admitting success and failure candidly along the way. I have trouble finding fault with that approach, successful or not in the long run.
Disagree
If after 1 year, you feel a $20 million loss is ok, then you need to wake up.
If he does not want to run SNS, then why make the company give yhim a board seat, why make the board make him CEO and why can't he find a CEO. Well, the last one they tried to hire, went elsewhere instead of SNS. That says a lot. Sardar won't even name him. Maybe he never exised?
"Lastly, Sardar never compared himself to Buffett, I just want to point that out. The comparison has been made by myself and others. The comparison is not that he will be nearly as successful, but that his methods and way of thinking are similar, which I believe they are."
Sardar is NOTHING like Buffett and never will be. Buffett MAKES money for his investors. Sardar thinks NOTHING like Buffet, otherwise "WEST" & The Lions Group would be making money.....tons of money like Buffett does. So please, don't even use the name of "Buffett" with Sardars, unless you are talking about a piece of furniture and not "The MAN".
I never said I attended the meeting. I would not own one piece of stock that Sardar owns, since he cannot make money for his shareholders.
Maybe he'll try to buyout White Castle next. Their food is better than any Western Sizzlin I've ever eaten in. Then again, he knows nothing about running them either. That sounds like a perfect match for him.
wow.
That is some pretty harsh stuff to say, I mean, it isn't like Warren Buffett hasn't had his own mis-steps along the way. After all, he did invest in an Airline, General Re didn't work out so well (thanks to 9/11), and Dexter was a total flop-not to mention the textiles. Just because Sardar has not pleased you with his short term gains doesn't mean that he doesn't have a good sense of value. Turning around companies takes time.
Friendly's Ice Cream seemed to have worked out well for WEST, as did the Applebee's buyout. WEST is currently in the process of turning around it's own restaurants-as is SNS... By the way, Sue Aramian did co found the Steak n' Shake that we know today, you are right to say that Gus Belt founded the company, but in the 80s, the company was gonna be in bankruptcy if Sue Aramian and E W Kelley didn't save the company.
I am sure that while WEST has had a major loss on SNS things will turn around. The real estate that they own free and clear is quite valuable, and could buy back most of the stock if it were to be sold. The company is dirt cheap, and is worth well more than 4x what it is presently trading at.
In regards to Itex, Circle of Competence is right, he made that offer to benefit WEST shareholders. Itex stock is a steal right now, as could possible be indicated by the board of the company having been examining a possible sale of the company-to none other than *gasp* International Monetary Systems, among other companies.
Don't get me wrong, there are things that Sardar has done that I don't necessarily agree with, I am still (even after the WEST meeting) not sold on his use of SNS options. He has even said that he does things differently than Warren Buffett, but this doesn't mean that you should totally disregard everything he says. I mean, I would consider myself to be pretty aligned with the Austrian School of Economics, but I still think that J M Keynes had some good things to say... In the same sense, when attending the WEST meeting, I would consider it to be one of the more valuable handful of hours in my life-at least as far as gaining knowledge and insight on investing and business in general.
Just keep an open mind, that's all I'm really getting at.
If that's how you feel, I
If that's how you feel, I guess that's all I have to say. Good luck.
btw
By the way, your guy's blog is great. Keep up the good work.
Thanks Jeff. Keep reading!
Thanks Jeff. Keep reading!
WOW comment
I would love to have you explain how you think ITEX would sell to IMS. IMS is the worst run company in the Barter business. DM has all his family on the Board, uses off-shore financing that cannot be traced and owes more people for his buyouts than anyone. Ya think this is why the SEC is looking into his company????? I would say in a year or less, ITEX will own IMS or IMS will be gone. The CEO of ITEX would never agree to pay off the huge debt of IMS. His debt makes his company worthless.
I appreciate your comments. SNS could be a great company, under the right leadership, which they have not had in 20 years. Cutting costs should not be that hard. Franchising will never work at SNS and never has. They need to simply go back to the basics that made them the #1 restaurant they once were. I hope it happens. Sardar could spend his money more wisely. he went after ITEX after talking to just one person, who by the way is only a shareholder, nothing more. Western is a client of ITEX, but yet he knows nothing about the company or how they work. I really wonder if her knows his restaurants are an ITEX member.
Only the future will tell. Let's hope for the best for all of us.
WOW response.
On SNS: You are right on it having the potential to being a great company. Capital is being re-allocated, the menu is being trimmed and they are working on implementing point of sale technology in order to help with staff... This goes along with various tax savings that have been found too. Their franchisees do better business than the corporately held stores, and I would imagine that there will be a decent amount of re-franchising in the future... This is one of the things that makes ITEX such a great company, the franchise model that they have.
On ITEX: It really isn't that hard of a concept to understand, basically a slightly modified barter system. I will say that I don't know how IMS would go about buying them, as I see little value in IMS, and don't see where they would get the 25-30 million that they would need to buy ITEX. The tidbit that I said bout ITEX going to them was due to White's opposition to WEST, as could also be indicated in their "examining of strategic alternatives". The IMS sale was something that has been circulating around, and I don't have firsthand knowledge of it other than what I heard from a shareholder of IMS.
Question: why would Sardar have only talked to a single shareholder about ITEX?
Even if that is the case, the company is really undervalued, which is something that by your user name and adamant defense of the company, I'd figure you'd agree with.
Response to WOW
You make some very good points Jeff. I hope SNS turns it around. I would hate to see them go away.
IMS would never have the cash to buy ITEX, since he makes all of his purchases with stock options in his company, that are basically worthless.
I agree that ITEX is way under-valued and Sardar showed that to everyone with his low offer. Actually, his offer has helped ITEX more than anything in the last 5 years, with the exception of Steve White taking over. Before Steve, the company was the worst run company in the business and it was about 3 months short of bankruptcy. He came in and turned it around in 3 months.
With the ecomomy the way it is right now, ITEX will do nothing but do great.