Sahm Adrangi hasn’t made his fortune as an investor by betting for companies he hopes will do well, instead, he bets against companies that he thinks are going to fail due to misrepresenting their business to the investors and consumers. He does this through the process known as short-selling and one of the latest companies to earn this position is the St. Joe Company in Florida. This land developer has been making promises to its investors for over a decade that just haven’t come to fruition. In fact, there does not appear to be any progress being made on the promised land developments in the swampy region of central Florida.
While the desolate land that St. Joe is promising to turn into a bustling retirement community complete with business developments isn’t the only land St. Joe has plans for, it does make up the majority of it. Sahm Adrangi does not have any faith that the company will be able to turn their land in central Florida into anything that resembles their beachfront developments on the coasts of the state. Even with the delays, St. Joe is still making promises to its investors and insisting that more developments will be coming along soon. Sahm Adrangi believes that once Fairholme Funds, one of the largest investors into their developments, is forced to fulfill the new SEC regulations concerning liquidity that they will have to sell about half of their shares of St. Joe. Once this forced sale has taken place, the future of St. Joe will be in question.
Although St. Joe values their stock at just around $1 billion, Sahm Adrangi thinks this number is considerably inflated. Currently, he believes that they are actually worth around 40% less than what St. Joe is telling its investors. Once Fairholme Funds is forced to sell the majority of their shares, Sahm Adrangi believes that the companies shares will fall to reflect his valuation of the company. By shorting St. Joe, Kerrisdale Capital stands to profit if St. Joe’s stocks drop.