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The St. Joe’s Company Negative Report by Sahm Adrangi of Kerrisdale Capital

Sahm Adrangi is the founder of Kerrisdale Capital Management Company. He is an institutional investor currently located in New York City and a holder of a degree in Economics from Yale University. Before establishing Kerrisdale Capital, he worked at Longacre Fund Management as a capital analyst. He also worked as an analyst in Chanin Capital Partners, and Deutsche Bank.

Kerrisdale Capital Management, currently managed by Mr. Sahm Adrangi, is an investment firm that mainly focuses on long-term value investments as well as particular situations that are event-driven.

Recently, Mr. Sahm Adrangi issued a negative report on St. Joe Company, which left investors with a lot of questions about the news. Although the real-estate development company located in Florida appears to be a desirable investment niche for investors, the negative report issued by Sahm Adrangi shows that it has transparency issues. The St. Joe Company has intentions of transforming the underdeveloped land near the city of Panama Beach to a more appealing place for businesses and retirees.

However, the negative report shows that the patience and the time needed to reclaim and transform the land is almost impossible because the place is swampy, desolate and occupied by an industrial pine. Additionally, the real-estate development company has promised its long-term investors that it will take about 50 years to turn the swamp into a productive land for businesses and retirees yet no progress regarding permits and other advancements has been made for more than a decade now.

Also, the development company has several shareholders in question, like Fairholme Fund, which happens to be its largest shareholder. The fund, which is managed by Bruce Berkowitz, owns 22.7M shares which translate to 24 percent of shares. According to the new liquidity management rules set by SEC, liquid investments are limited to 15 percent of the net assets.

This means that Fairholme fund is required to reduce its investment in St. Joe Company drastically. Therefore, there are a lot of questions arising about the relationship between the fund and ST. Joe company especially Mr. Bruce who is the chairman of St. Joe Company Board. Both companies are thus subjected to a possible lawsuit over the current SEC rules, and if Mr. Bruce leaves the board, there could be an adverse reaction on the market due to trust issues regarding the real-estate development company.

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