Fairholme Stops Standing Still on JOE

There is a flurry of news today about St. Joe Company (JOE), a subject of a few posts a while back, first triggered by the informative presentation by Greenlight Capital. Into the argument came Bruce Berkowitz and the Fairholme Fund, owners of almost 30% of JOE, who poo-pooed all the arguments brought forward by Greenlight. Well, it appears today that Fairholme has finally awakened from its romance with the stock and has come out swinging MMA style.


CNBC reported today that Fairholme will seek to nominate Bruce Berkowitz and Charles Fernandez, directors of the company and executives of Fairholme, to the positions of Chairman of the Board and Vice-Chairman, respectively. CNBC reports that Fairholme will seek to dramatically shift the business model, including cutting the expense structure, perhaps stopping some planned asset sales, and looking for partnerships and new acquisitions.

A Morningstar analyst who has been quite bullish on the company, and who carries a $40 fair value on the stock, is fearful that momentum now being built up in the company's value-creating activities will be blunted by the Fairholme moves. It's hard to see what he means by this, as it's clear that some progress has been made--the company is not hip deep in a peat bog any more. However, to characterize anything JOE is doing as "momentum" seems a real stretch. Institutional investors control about 65% of the shares, and so it would seem that the Fairholme play should be a fait accompli barring the ability of the company to divide the shareholders, which would seem unlikely.

It's good to see Fairholme waking up, and its initially glib, dismissive attitude to the Greenlight Capital report has now been replaced by a sense of urgency. It should be good for the shareholders, once their plans are made more specific.