Sahm Adrangi is the founder and Chief Investment officer at Kerrisdale Capital Management LLC, and he has been a critical figure in the firm since its inception in 2009. Kerrisdale Capital is a private investment manager and occupies a short position in The St. Joe Company. The latter is a real estate development company that plans to transform an abandoned land near Panama City Beach into a preferred destination for settlement and businesses. However, Sahm Adrangi confirms that this is unlikely owing to a poor development plan, skeptic shareholders, and strict SEC provisions. In fact, Kerrisdale claims that the company lacks strategy on how to go about the project.
According to Kerrisdale, it will be difficult for St. Joe to develop the land near Panama Beach in a way that corresponds to the company’s valuation of 1 billion dollars. Reason being, the land, just like most of its remaining development lands, is located in a swampy and remote area where people are unlikely to settle. Sahm Adrangi notes that the plans in place regarding St. Joe’s interior lands are no more feasible than they were a decade ago. He adds that the investors who have been patient with the company have no choice but to wait longer for the company’s management to come up with viable plans.
St. Joe’s problems are exacerbated by the introduction of new liquidity rules that significantly affect the shareholders; Fairholme Funds, St. Joe’s largest investor is required to cut its shares by nearly half to meet the requirements of SEC. Over the years, Fairholme Funds’ assets have declined more than 90 percent due to poor stock selection. The company holds more than a third of St. Joe’s shares but will be forced to relinquish a large percentage of them. The new regulations subject St. Joe’s shareholders to the risks of a forced seller. In regard to shares, Sahm Adrangi believes that St. Joe’s shares are worth 40 percent less than their current value and therefore the prices ought to be reviewed.