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Stingy Investor Tip Sheet

Value Destruction

Biglari Holdings's (BH) Biglari wasn't content with slapping his name on a company he recently gained control of. No siree. He also moved to line his pockets with a big performance fee . . .

"The Incentive Bonus Agreement provides Mr. Biglari the opportunity to receive annual incentive compensation payments based on the Company's book value growth for each fiscal year. If the Company exceeds a 5% annual book value growth hurdle, Mr. Biglari would receive an incentive compensation payment equal to 25% of the Company's book value in excess of that hurdle."

But it turns out that investors aren't nearly as keen and have been dumping shares this week after the fee was announced last Friday ...

(BH Chart)

Just after midday, the stock had declined more than 25% from its recent 52-week high. Nothing like a 25% fee to inspire a quick 25% loss.

Forget the performance fee, a performance penalty seems to be in order...

05/05/2010   11:10 PM EST   Permlink   save & shareFees

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