Security National Financial (SNFCA)

Security National Financial (SNFCA) is a holding company offering a variety of low risk financial services.

The company has been around for about 42 years. Is capably managed by two generations of the Quist Family. There is a share structure in place with A and C shares. there are about 7.5 millino A shares outstanding and a similar amount of C shares. The C shares have the same voting rights as A shares, but C shares only have 1 tenth the economic rights of A shares.

Most financial information services get the share structure wrong. For instance according to Bloomberg or Yahoo Finance, the Total Oustanding A shares is pulbished as being about 15 million.
This is wrong. The there are 7.5 millino A shares oustanding, and the C shares do not trade at all. If the C shares were to be conversted to A shares (as they can at any time) there would be about 700,000 more A shares in existence. Thus on an as converted basis, there are 8.2 million A equivalent share outstanding.

The market capitalization of the company is 8.2 millin A equivalent shares X $4.35 per share, or 35.7 million dollars.

The book value is $54.3 million. (only 2 milion are intangible, ergo most book value is of solid tangible nature). Book value per equivalent A share is about $6.62 on a fully dilluted basis. The basic share count outstanding is a bit lower, since some shares are currently outstanding under yet to be exercised shares.

If options were to be exercised, the equity would increase to perhaps 60 million and the book value per share would be way north of $7. The calculation of the book value per share in its precise way is made by company on each earnigns press release.

Admittedly, the share structure of this company is complicated, and this is why most investors dont even get to look at this company what they do.

It is very likely that most investors are little impressed when they see on bloomberg or yahoo finance a life insurer with supposedly 15 millino A shares outstanding trading at a market cap in the range of 65 to 80 million (the recent market caps displayed on bloomberg at then prevailing trading prices) that only has 54 million in equity.

What visitors to a bloomberg see when they type in SNFCA is a company trading at currently 20% premium to book value. as recent as the past 2 weeks this company traded for bloomberg viewers at 88 million market cap or 63% premium to book value.

Bloomberg is simply wrong in its portrayal of the sharecount, market cap and resulting book value per share calculations.

In any event, this is just to introduce the potential reader to the misperceptions that prevail with this company.

Before even startign doing research or due diligence on this company, the first thing to start is to verify the capital structure and make sure you understand how the shares work. The reason why both bloomberg and yahoo are confused is that usually the difference between A and C or A and B shares is that they have same economic rights, but the C or B shares have supervoting rights. Most companies with different shares classes will structure things in such a fashion that the the economic rights of outstanding shares are the same.

Not in this case. SNFCA has structured things in such a fashion that the economic rights are unequal but the voting rights are equal. The C shares, if they were to trade at all would only trade at about 1/10 the price of the A shares.

This is a big source of confusion and leads to lots of misunderstandings. Particularly when it comes to exercisign of managemetn options for the purchase of C shares.

Do your own independent verification before proceeding to the discovery of teh actual SNFCA business operations. They are worth the discovery, but with a good understandign of the capital structure is all is getting a whole lot easier.