The Plot Thickens at St. Joe (JOE)

The ongoing fight for how to run The St. Joe Company (NYSE: JOE) is heating up and taking a strange turn.  Bruce Berkowitz, whose Fairholme Capital is a near-30% owner of St. Joe, has now resigned from the St. Joe board of directors.  While the deadline for a proxy fight may have passed for outside holders, that might not hold true for the largest stakeholder who owns this much stock.

The reason cited for leaving the board was a disagreement over how to run the company. St. Joe is the largest private owner of land in Florida with more than a half a million acres of dirt in Florida’s panhandle.  Berkowitz has said that he would like to buy all of St. Joe if he could.

There is also a bit of a horse race taking place with Berkowitz as the prominent bull against hedge fund manager David Einhorn of Greenlight Capital, who has said St. Joe has been too aggressive in acquiring property and called it very overvalued.

Bruce Berkowitz and Charles Fernandez have both withdrawn their names as candidates for future election to the board of directors of St. Joe.  What is interesting about the departure is that is just about a week after Berkowitz and Fernandez participated in their first St. Joe board meeting.   It seems that the two even had trouble calling for a meeting, let alone getting board members to allow changes to its future strategy.  Berkowitz has discussed governance, oversight, and compensation as points of disagreement.

St. Joe has said it would engage Morgan Stanley to help it explore strategic alternatives for the company, which could be a change to operations, a merger or sale, asset and property sales or joint ventures.  The good news for existing St. Joe holders is that Berkowitz is apparently not going to unload shares.  That is important because his 26.7+ million shares is close to 17-days worth of trading volume.

Whatever comes from this is hard to know, but a proxy fight would seem likely here.  Berkowitz has deeper pockets than St. Joe and he can probably coerce shareholders who have seen shares crash after the housing bubble.  Shares of St. Joe have risen by more than 50% since December.

The initial reaction is not a favorable one with shares down 3% at $26.07 so far this Monday.  The 52-week trading range is $17.04 to $37.44 and shares briefly went north of $80.00 at the peak in the summer of 2005.


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