NEW YORK, April 24, 2018 /PRNewswire/ -- Kerrisdale
Capital, a private investment manager, has published a negative
report explaining its short position in The St. Joe Company (NYSE:
JOE), a ~$1 billion Florida real estate development company that
hopes to transform a vast area of desolate land near Panama City Beach into an attractive
destination for retirees and businesses.
The full report can be found at http://kerr.co/joe.
St. Joe is unlikely to develop its land in a manner that
justifies the company's current $1
billion valuation. Located in swampy, remote, desolate
areas, the bulk of St. Joe's remaining land holdings stand in stark
contrast to the beachfront land St. Joe has already monetized. To
justify the current valuation, the sellside assumes that more than
2,700 homesites and 400k square feet
of commercial space are sold every year, for fifty years. Yet that
would mean that St. Joe's supposed new retirement district would
immediately become the top-selling master-planned community in
America and that more St. Joe commercial real estate would be sold
than that absorbed in the entire Panhandle market in 2017.
In reality, there has been little progress on St. Joe's interior
land, and our channel checks have found that there is minimal
activity in terms of building department inquiries, permit filings
or other signs of advancement.
"The company's plans for its interior lands are no more feasible
now than when they were first proposed over a decade ago," said
Sahm Adrangi. "Long-suffering
investors who have waited years for progress should be prepared to
wait longer – St. Joe continues to struggle in its attempt to
monetize its land at a pace that can remotely justify its current
valuation."
Compounding problems for shareholders is the looming required
compliance by St. Joe's largest investor, the Fairholme Funds, with
new SEC liquidity rules enacted two months ago. Due to years of
poor stock selection, the Fairholme Fund's assets have declined
more than 90% from its peak and as assets have plummeted, its
position in St. Joe has become an ever larger percentage of the
fund. Under the new rule, Fairholme, which holds more than a third
of St. Joe's shares, should be forced to cut its position by nearly
half. Fairholme's impending demise, and the need to comply with the
new SEC regulations, subjects St. Joe shareholders to the risk and
uncertainty of a forced seller.
Kerrisdale believes no reasonable set of development assumptions
point to upside for the stock. Kerrisdale thinks St. Joe shares are
worth 40% less than its current value, and forced selling by its
largest shareholder due to new SEC limitations on illiquid equity
holdings should serve as a catalyst.
Kerrisdale has a short position in St. Joe Company and stands to
benefit if its share price falls.
Conference Call Schedule
Kerrisdale will host a
conference call on Tuesday, April 24
at 10:30am ET to discuss the The St.
Joe Company report.
To participate in the conference call, dial (866) 834-3313
(United States) or (409) 981-0700
(international) and reference the Kerrisdale Capital call or
conference ID 5662359.
About Kerrisdale Capital
Kerrisdale Capital
Management, LLC, is a fundamentally-oriented investment manager
that focuses on long-term value investments and event-driven
special situations.
Kerrisdale Capital Management, LLC is a member of the Financial
Industry Regulatory Authority, CRD number 160804
Contact
Agnes Cao
Kerrisdale Capital
acao@kerrisdalecap.com
212-257-4385
Sahm Adrangi
Kerrisdale Capital
sadrangi@kerrisdalecap.com
212-792-9148
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SOURCE Kerrisdale Capital Management, LLC