10-K/A: Biglari Holdings Amends 10-K, Reveals Lion Fund II Losses

Biglari Holdings Inc. filed an amendment to its annual report to include the audited financial statements of The Lion Fund II, L.P., which reported significant decreases in partners' capital and negative returns for 2024 and 2025.

Summary

• Biglari Holdings Inc. filed Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, to include separate audited financial statements of The Lion Fund II, L.P. (the Fund).
• The Lion Fund II, L.P. reported a net decrease in partners' capital resulting from operations of $63,437,037 for the year ended December 31, 2025, following a decrease of $25,778,772 in 2024.
• Partners' capital for The Lion Fund II, L.P. significantly declined to $129,150,990 as of December 31, 2025, from $179,427,486 at December 31, 2024.
• The Fund experienced negative total returns before performance reallocation of (35.75)% in 2025 and (13.59)% in 2024, contrasting with a 12.67% return in 2023.
• Net investment income was negative for both 2025 ($(6,585,645)) and 2024 ($(3,356,596)), compared to positive income of $2,258,612 in 2023.
• Investments in securities at fair value decreased to $291,142,022 in 2025 from $366,541,274 in 2024.
• The General Partner, Biglari Capital Corp., did not earn a performance reallocation during 2025, 2024, or 2023, as the Fund's performance did not exceed the 6% hurdle rate and high-water mark.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative development for Biglari Holdings Inc. given the significant underperformance and capital erosion within its managed fund, The Lion Fund II, L.P., which could reflect poorly on the parent company's investment management capabilities.

Positives

• Cash and cash equivalents for The Lion Fund II, L.P. increased to $1,909,088 as of December 31, 2025, from $1,088,624 as of December 31, 2024.
• Due to broker (margin debt) for The Lion Fund II, L.P. decreased to $163,703,116 as of December 31, 2025, from $187,986,764 as of December 31, 2024, indicating reduced leverage.
• The Lion Fund II, L.P. increased its investment in Ferrari N.V. to $182,455,908 (490,300 shares) in 2025 from $171,135,702 (401,500 shares) in 2024.

Negatives

• Partners' capital for The Lion Fund II, L.P. significantly decreased by over $50 million, from $179,427,486 in 2024 to $129,150,990 in 2025.
• The Lion Fund II, L.P. reported substantial negative total returns of (35.75)% in 2025, worsening from (13.59)% in 2024.
• Net decrease in partners' capital resulting from operations for The Lion Fund II, L.P. was $63,437,037 in 2025, following a $25,778,772 decrease in 2024.
• Net investment income for The Lion Fund II, L.P. was negative for two consecutive years, at $(6,585,645) in 2025 and $(3,356,596) in 2024.
• The Lion Fund II, L.P. substantially reduced its investment in Cracker Barrel Old Country Store, Inc. from $105,720,000 (2,000,000 shares) in 2024 to $14,859,000 (585,000 shares) in 2025.

Risks

• The Lion Fund II, L.P. has a concentration of credit risk with financial institutions for securities transactions, although this is mitigated by regulatory compliance.
• The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, and actual results could differ from these estimates.
• The General Partner did not earn a performance reallocation during 2025, 2024, or 2023, indicating that the Fund's performance did not exceed the 6% performance hurdle rate and high-water mark provision.

Future Outlook

The filing is an amendment to include historical audited financial statements of The Lion Fund II, L.P. and does not contain forward-looking statements or guidance for Biglari Holdings Inc. or The Lion Fund II, L.P. beyond the scope of the audited financials.

Management Comments

• "Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report." (Sardar Biglari, Chairman and Chief Executive Officer)
• "Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this report." (Sardar Biglari, Chairman and Chief Executive Officer, and Bruce Lewis, Controller)

Industry Context

StockSavvy.ai notes that the significant negative returns and decline in partners' capital for The Lion Fund II, L.P. in 2024 and 2025 reflect a challenging period for some investment funds, particularly those with concentrated holdings in specific sectors like restaurants, as seen with the reduced Cracker Barrel position. The increased allocation to Ferrari N.V. suggests a strategic shift towards luxury consumer goods, potentially seeking growth in a different market segment.

Comparison to Industry Standards

• The Lion Fund II's negative total returns of (35.75)% in 2025 and (13.59)% in 2024 significantly underperformed broader market indices such as the S&P 500, which saw positive returns in both 2023 (approx. +26%) and 2024 (approx. +24%), indicating substantial relative underperformance.
• The substantial reduction in Cracker Barrel Old Country Store, Inc. holdings, from $105.7 million to $14.8 million, suggests a divestment strategy, possibly due to underperformance or a change in investment thesis, contrasting with some value funds that might hold through downturns.
• The increased position in Ferrari N.V. to over $182 million indicates a strong conviction in the luxury automotive sector, which has generally shown resilience and growth, outperforming many traditional consumer discretionary stocks.

Corporate Governance

Related Party Transactions

• The General Partner, Biglari Capital Corp., is entitled to a 25% performance reallocation from The Lion Fund II, L.P., subject to a 6% hurdle rate and a high-water mark provision. No reallocation was earned in 2025, 2024, or 2023.
• Sardar Biglari is the Chairman, Chief Executive Officer, and sole owner of Biglari Capital Corp., and also Chairman and Chief Executive Officer of Biglari Holdings Inc.
• Biglari Holdings Inc. is a limited partner in The Lion Fund II, L.P. and is subject to the performance reallocation.
• The Lion Fund, L.P., another fund managed by Biglari Capital Corp., is also a limited partner in The Lion Fund II, L.P. but is not subject to a performance reallocation.

Stakeholder Impact

• Shareholders of Biglari Holdings Inc. may be negatively impacted by the poor performance of The Lion Fund II, L.P., given the related-party nature of the fund and potential implications for overall company valuation and investor confidence.
• Limited Partners of The Lion Fund II, L.P. experienced significant capital erosion and negative returns in 2024 and 2025, directly impacting their investment value.
• Management of Biglari Capital Corp. (the General Partner) did not earn performance reallocations for three consecutive years, indicating a lack of performance-based compensation from this fund.

Next Steps

• The filing should be read in conjunction with Biglari Holdings Inc.'s filings made with the SEC subsequent to the Original Filing.

Key Dates

Recommendation

The significant and sustained underperformance of The Lion Fund II, L.P., as evidenced by substantial negative returns and a sharp decline in partners' capital over the past two years, raises concerns about the investment management capabilities associated with Biglari Holdings. While this filing pertains to an amendment for a subsidiary fund, the magnitude of the losses and the lack of performance reallocation for the General Partner (a related entity) suggest underlying issues that could negatively impact Biglari Holdings' reputation and financial outlook. A seasoned investor would likely view these results as a strong indicator to reduce or exit positions in Biglari Holdings, especially given the concentrated nature of the fund's investments and the apparent misjudgment in certain holdings.

Keywords

Biglari Holdings, Lion Fund II, SEC Filing, 10-K/A, Investment Fund, Financial Statements, Partners Capital, Investment Performance, Restaurant Stocks, Ferrari, Cracker Barrel, El Pollo Loco, Jack in the Box, Sardar Biglari, Asset Management