The outlook for the St. Joe Company doesn’t look good among reports from Sahm Adrangi’s Kerrisdale Capital. The company may be facing a large amount of forced selling from their shareholders due to problems within St. Joe’s and the business that have invested in them. Among these businesses, Sahm Adrangi discussed the problems facing their main shareholder, the Fairholme Fund.
The Fairholme Fund owns approximately 1/3 of St. Joe’s, but with new regulations from the Securities and Exchange Commission, that is sure to change soon. Like St. Joe, the Fairholme Fun used to be quite an impressive company until poor decisions and market conditions affected their portfolio. Since their peak, Fairholme’s assets have dropped by upwards of 90%. This leaves them in a position where they will be forced to liquidate a considerable portion of their assets to avoid repercussions from the SEC. It’s expected that they will be cutting their shares in St. Joe by around half in order to meet the new regulations.
Even if this was the only potential problem that St. Joe was facing, they would still be facing a questionable future according to Sahm Adrangi. Around a decade ago, St. Joe purchased land near Panama Beach with plans to develop it into an impressive community designed for retirees including housing and businesses. Unfortunately, unlike their other successful communities, the property that they purchased is rather desolate and mired by swampland. While St. Joe may be telling their investors that progress and a return on their investment is coming, the research by Kerrisdale Capital and Sahm Adrangi shows that no concrete actions have been taken to develop the land. At the time of their research, no building permits had even been applied for.
Sahm Adrangi has presented evidence to show that their $1 billion valuation is severely overhyped and has little or no chance of reaching the promises that they sold to their investors. Kerrisdale believes that the actual value of the company is significantly less by around 40%. It is because of all of this that Kerrisdale has chosen to take a short position on St. Joe.