Sahm Adrangi is well known for going against the grain with his investment strategies at his hedge fund Kerrisdale Capital. Instead of employing a long only investment strategy, Adrangi is known as an activist short seller, finding shares of companies that he believes to be fraudulent or otherwise overpriced. Then, Adrangi waits for these stocks to depreciate, covering his short sale for a profit. Sahm Adrangi has uncovered numerous fraudulent companies and made a name for himself betting against shares of certain Chinese corporations that later turned out to be pyramid schemes. A tweet from Adrangi is most definitely a feared thing among corporate executives.
Recently, Sahm Adrangi took a short position in shares of The St. Joe Company. This short position was accompanied by the issuance of a negative report about the company, detailing the reasons why Adrangi believes that its shares will depreciate. St. Joe is built on the premise that it can take a stretch of isolated land on the Florida Panhandle and transform it into a vibrant retirement community and business hub.
According to Sahm Adrangi, the prevalent investment thesis underlying the bullish trade on The St. Joe Company is based on unrealistic expectations. Primarily, the company’s proponents are assuming overly rosy sales assumptions that the company will need to maintain for the next 50 years. St Joe’s previous developments have been beachfront land, which, in contrast to swampland, is easy to develop. The current property that St. Joe hopes to develop will require a much more difficult development process. Sahm Adrangi believes that these development plans are simply not realistic.
Adding to St. Joe’s list of issues is the fact that its largest investor, the Fairholme Funds, is facing an upcoming cash crunch. As a result of this liquidity crisis brought about by new Securities and Exchange Commission regulations, Fairholme may be forced to liquidate at least a portion of its large holdings in shares of St. Joe. The forced sale of a large block of company stock will cause a downturn in shares of St. Joe.