Investing doesn't get more dramatic than it did Wednesday at the Value
Investing Congress in New York, where hedge-fund manager David Einhorn took
apart the St. Joe Company in 139 slides. Before his speech had even ended,
shares in the Florida real-estate developer (ticker: JOE) were down 10% from
their opening price of 24.71. They ended the week at 20.56, giving St. Joe a
market value of $1.9 billion -- $370 million less than when he started
At a May 2008 conference, Einhorn famously made the bear case on Lehman
Brothers, which rose five bucks afterward. So, this time, he brought more
evidence, including photos and video showing the company's properties were "
ghost towns." The best stuff has been sold, he said, and any "further
development destroys value."
Einhorn argued that St. Joe should write down the value of three
developments carried on the books at $280 million, but which his Greenlight
Capital values at less than $40 million. St. Joe shares aren't worth much more
than 10 bucks, at best, he asserts.
Florida's real-estate calamity has dashed bullish dreams for St. Joe, as
well as Barron's positive stories written in 2004, 2008 and 2010. The last piece
(" Fairholme, Sweet Fairholme," Jan. 18, 2010), penned when the stock was at 30,
profiled Bruce Berkowitz, whose Fairholme Capital Management is St. Joe's
biggest investor. On the day of Einhorn's broadside, Berkowitz added 135,600
shares to his funds' holdings; they now own 29% of the stock. Berkowitz also
filed with regulators, signaling he wants to work with the company to increase
shareholder value. "We would love to own 100%, if possible," he told Barron's.
On Friday, St. Joe declined to comment.
Einhorn told his audience that he had tried to communicate with St. Joe
and Berkowitz, but was ignored. Berkowitz says a debate would be of no benefit
to his mutual funds' investors. Instead, he says St. Joe should host a meeting
for investors, showing them the attractive properties Einhorn left out. He plans
to review the slide show in detail, and thinks it should be brought to the
attention of Florida's governor and U.S. senators. "We must be talking about a
different place," he says.
Berkowitz says observers might find Einhorn's reality is right in the
short term, , and Fairholme's is right in the long term. "We're not in a rush,"
he says. "It's real estate. It's not going anywhere."
If only that were true of the stock.