Einhorn Says St. Joe Needs ‘Substantial’ Writedowns
David Einhorn of Greenlight Capital Inc.
Jonathan Fickies/Bloomberg
David Einhorn, president of Greenlight Capital Inc.
David Einhorn, president of Greenlight Capital Inc. Photographer: Jonathan Fickies/Bloomberg
St. Joe Co.’s shares plunged after David Einhorn, who profited from bets against Lehman Brothers Holdings Inc. in 2008, said the Florida real-estate firm must take “substantial” asset-impairment charges and that further building will drive the stock price to zero.
“The best properties have been sold, many lots were sold to speculators during the boom, and when the boom ended, business essentially stopped,” Einhorn, who runs hedge-fund operator Greenlight Capital Inc., said today at the Value Investing Congress in New York. “There’s little evidence of how Joe spent so much money on these developments. Many developments are ghost towns and little value remains.”
St. Joe, based in WaterSound, Florida, retreated 9.7 percent to $22.16 at 4 p.m. in New York after falling as much as 11 percent, the most intraday since December 2008. The shares have declined 23 percent this year.
“It is important to understand that an investment in St. Joe is an investment in a company that has a virtually debt free balance sheet and owns approximately 577,000 acres of land concentrated primarily in Northwest Florida,” the company said in a statement issued after markets closed. “We continue to focus on the execution of our strategic plan in order to maximize the value of our assets.”
Untouched Land
David Childers, St. Joe’s vice president for finance, didn’t respond to e-mails and phone messages seeking more specific answers to Einhorn’s criticisms.
The company is accounting for untouched land as developed, Einhorn said. Also, St. Joe’s RiverTown community is a “moonscape,” and WaterSound is empty, he said.
“Joe’s highest and best use is to return to a rural land company,” he said. “Management should sell the company, but it can’t because the stock price is too high.”
While Einhorn didn’t say how much he’s betting against St. Joe, he said he will lose a lot of money should his thesis prove wrong.
Originally a timber and paper producing company, St. Joe moved its headquarters from Jacksonville to be closer to its developments on Florida’s Gulf Coast near Panama City. St. Joe sponsored the Northwest Florida Beaches International Airport, which opened May 23, the first new international airport in the U.S. in 15 years. It owns 300,000 acres within 40 miles of the airport, where it plans commercial and residential developments.
The company was hit by Florida’s real estate collapse and the threats posed by the Deepwater Horizon oil spill in the Gulf of Mexico. St. Joe’s shares fell from a high of $37.13 on April 29, when oil spewing from the BP Plc well threatened its waterfront properties, including WaterSound and WaterColor.
“Management is trying to distract investors by blaming the oil spill and hoping for a legal lottery windfall,” Einhorn said today.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; John Gittelsohn in New York at johngitt@bloomberg.net.
To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net; Kara Wetzel at kwetzel@bloomberg.net.
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