St. Joe's Chairman Tells All to Bloomberg, But it Won't Help
July 05, 2011
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There was an interesting discussion on the Bloomberg TV’s early show Tuesday morning with Bruce Berkowitz, chairman of Florida developer St. Joe’s Co. Berkowitz, who heads Fairholme Funds, the largest investor in JOE, was appointed chairman of the company last March. The story – which was a small bit of high financial drama over the long 4th of July weekend – teaches a lesson about internet buzz in the Twitter/Facebook age.
On June 20th, the SEC informed St. Joe that it was being formally investigated for “a variety of matters, including fraud, compliance, how kosher the books are, etc. It sounds dramatic, but the truth is that these kinds of investigations are not uncommon, and the SEC had already opened an informal investigation into the company last January. It will be recalled that Berkowitz got involved in this story in October 2010, when he bought shares of St. Joe when it had a “Globodyne moment,” with shares plummeting while Greenlight’s David Einhorn slammed the company at a conference.
The TV discussion did not focus on the investigation – the people to ask about that would be at the SEC, I suppose. What it did focus on was the timing and format of St. Joe’s informing the public about the investigation – at 8:30 PM on the Friday night before a three day summer holiday weekend, when everyone is either out at barbecues or listening to the “Firecracker 500” rock countdown on the radio! The information about the investigation was released in an SEC Form 8-K, used to inform investors of an important “material event.” Which of course a formal investigation is, but releasing it as an 8-K on the Friday night of a holiday weekend made it seem like a really material event – the kind that companies try to bury in the back pages of corporate reports, for example.
Despite the time and the date, investors noticed the report, promptly sending JOE shares down 3.6%. The host on Bloomberg asked pointed questions of Berkowitz in the interview; he wasn’t even subtle about implying that “something was fishy,” from my point of view (I praise the host for the questions, btw – he did a good job of handling the PR content Berkowitz was trying to present as “answers.”)
Berkowitz gave what sounded like reasonable answers as to why the company waited over a week to file the 8-K on the investigation (“reasonable” in the sense that, as he said, the lawyers would want to check out the SEC note about the formal investigation thoroughly, except we don’t know that it really took them until 8:30 PM Friday night to do so).
And most importantly, he addressed the timing issue. It would be ludicrous to think that with today’s always-on communications and “permanent memory” web that it would be possible to slip something by under the radar, Berkowitz said. He said the company had its own reasons for releasing the information before the holiday weekend, instead of waiting until Tuesday (to let investors know that he had their backs by offering share buybacks, he said). And that his lawyers did not advise him as to when to release the 8-K, so there were no “legal implications” beyond what the statement itself says. “Now you know the story,” Berkowitz told the host. And now we do. But as far as the buzz is concerned, it’s not going to matter.
Imo, Berkowitz missed his chance. It’s hard to imagine that the idea of “burying” the story didn’t occur to him, at least to some extent – but as the Twitter button on the Wall Street Scanner app shows, there is plenty of buzz to go around as the markets reopen. And the bloggers are all back at work Tuesday morning as well. If he had really wanted to bury it, he should have released the 8-K Friday morning, because the story would have been forgotten by Friday night (moving into weekend mode and all). Now the buzz is JOE tried to bury the story” – and that’s got to be worth a few dollars (down) in share price.
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More on St. Joe: http://blog.wallstscanner.com/joe
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