WHY SAHM ADRANGI’S KERRISDALE CAPITAL TOOK A SHORT POSITION ON ST. JOE COMPANY

According to Kerrisdale Capital, whose founder and CIO is Sahm Adrangi, St. Joe Company which is currently valued at $ 1 billion, is over-valued. The firm recently released a report which explains why it is shorting, saying that much of the land developer’s holdings are swampy, remote and unlikely to be developed soon. Some of the places the developers claim to have potential are desolate wastelands.

St. Joe Company’s value has been rising as it implements its 50-year plan seeking to develop large tracts of land near Panama City Beach. However, this plan, dubbed Bay-Walton Sector Plan,’ has hit numerous roadblocks and has not experienced real development in more than ten years. Moreover, the last time the plan received any blessing from state or local agents was in 2015, and also no public hearings have taken place, and no permits have been filed recently.

Furthermore, Fairholme Fund which owns $ 410million worth of St. Joe stocks in the form of 22.7 million shares (which is 24% of Fairholme assets) will have to limit its illiquid investments to 15% of net assets. To comply with new SEC regulations, Fairholme has to divest 10 million shares worth $ 180 million in 150 days, without ever affecting the price. Without these 150 trading days left before the December 1st deadline, there’s no time for an orderly unwind.

Sahm Adrangi also says that the partnership between St. Joe and Fairholme is rife with danger as Bruce Berkowitz, Fairholme fund manager, is the chairman of the St Joe board with two other directors also sitting on the same board. This opens up a possibility of a conflict of interest litigation, and in case the two directors leave the board, Kerrisdale anticipates a negative market reaction.

For St. Joes to keep its $ 1 million valuations, every year it would have to develop 2700 home-sites, 400k square feet of commercial space and become the best-selling master-planned community in the US. This is nearly impossible, and for this reason, among others, Sahm Adrangi is going short.

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Sam Adrangi Takes on the St. Joe Co.

Things do not look good for the St. Joe Company as Sahm Adrangi and Kerrisdale Capital have issued a very negative report on their future. The St. Joe Company is a real estate developer based out of Florida and is currently valued at around $1 billion. They are hoping to take an area near Panama City Beach and transform it into a destination catered to retirees and businesses. Currently, it is a desolate tract of land that Sahm Adrangi does not believe St. Joe will be able to transform it into anything near what would give the company such a high valuation price.

While St. Joe has developed some beachfront properties, the land that is in question is absolutely nothing like those areas. It is located in a remote area with land that is swampy and desolate, and this type of land makes up the majority of property that St. Joe has yet to develop. There has not been a lot of progress by St Joe on their land that is located in the interior of Florida and for them to achieve the type of business that would justify their high valuation they would have a lot of work to do. In order for them to hit the sales they would need, the land in development would need to be the best-selling community in the entirety of the United States. This would have to happen as soon as the planned community was put on the market and Sahm Adrangi does not think there is any reason that this could be possible to achieve.

When St. first introduced their plans to develop the swampy interior land, it wasn’t feasible for them to do then. Their initial investors have been awaiting progress that just does not appear to be happening any time soon. Upon further inquiry, it appears that there has not been hardly any activity at the site when it comes to permits or inquiries. Sahm Adrangi, gv the Chief Executive Officer of Kerrisdale, has shorted the St. Joe Company based on the results of the research done by his company.

http://www.futuresmag.com/author/sahm-adrangi

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