In 2011, the Chief Investment Officer of Kerrisdale Capital, Sahm Adrangi, made a name for himself when he successfully shorted a number of Chinese companies, exposing several of them for fraudulent practices. Recently, Sahm Adrangi and Kerrisdale Capital aimed their sights on St. Joe Company, whose valuation was is currently listed at $1 billion. According to the report, remote and undeveloped swampland have rendered much of St. Joe Company’s assets as “over-valued and over-hyped.” Upon assessing the true value of St. Joe Company’s holdings, Sahm Adrangi’s evaluation revealed that it considerably less than what is being publicly advertised – 40 percent less to be exact. The gross misjudgment regarding St. Joe Company’s valuation, is also exacerbated by the fact that they are experiencing issues with their largest shareholder, who may be forced to liquidate a large portion of their stock, as well as the fact that commercial development has been stalled for the better part of the last decade.
The reason for St. Joe Company’s high valuation, is due to their plan regarding the building of a retiree destination, as well as a commercial business center in the Panama Beach area. The problem lies in the fact that the majority of their land is not near the highly sought-after beach area, being that this property has already been commercialized. Much of what’s left consists of land that is far less desirable.
Today, Fairholme Fund is the largest shareholder of St. Joe Company, with 22.7 million shares, but recent changes regarding the Securities and Exchange Commission will require that 10 million of those shares are liquidated in order to remain in compliance. Being that these shares would need to be liquidated by December 1, 2018, Sahm Adrangi says that there are not enough trading days left to accomplish this feat without affecting the share price of St. Joe Company adversely. The role of Bruce Berkowitz, who acts as the chairman of the board at St. Joe Company, as well as the fund manager for Fairholme Fund, also presents a conflict of interest that may require him and two additional fund directors to step down. This will also play a negative role in the share price.