St. Joe (JOE) May $24 Call Volume; BlackRock, Fidelity Magellan Own a Huge Chunk of Shares

JOE May 24 Call (CBOE.com)
St. Joe (JOE:NYSE) saw 1,120 May $24 call options trade with 131 open yesterday. It looks like 653 calls traded on the International Securities Exchange (ISE) at 0.91 and the rest traded on the AMEX. JOE has been trading in a sideways channel for 3 years now and is now testing the 200 day moving average. With institutions and mutual funds loading up on the company, you have to wonder if there will be a major short squeeze or a deal led by Fairholme's Bruce Berkowitz, even though the company is only worth $7-10 per share! David Einhorn, hedge fund manager at Greenlight Capital, is, or was, short $JOE shares and released a detailed research report explaining why. On February 8, 2011, St. Joe announced that it was "exploring financial and strategic alternatives to enhance shareholder value".
JOE 3yr chart - Stockcharts.com
"The Board intends to consider the full range of available options including a revised business plan, operating partnerships, joint ventures, strategic alliances, asset sales, strategic acquisitions and a merger or sale of the Company. The Board of Directors has retained Morgan Stanley & Co. Incorporated to assist it in the evaluation of these alternatives." (source)

Look at all of these institutions loading up. Joe Ownership via SEC.gov: Fidelity Magellan (FMAGX) disclosed that it owned 7.4% of the company in a March 31, 2011 13G filing (Fidelity owned 11.4% in total), BlackRock owned 17.69% of JOE in total (13G filing), Fairholme Fund (FAIRX) owned 28.86% (13D filing), T-Rowe owned 11.2% (13G filing) and the Janus Contrarian Fund owned 8.8% of JOE (13D filing). Janus Capital Management owned 13.2% of JOE in total.

As of 3/31/2011 there were 19,844,359 shares short with 29.62 days to cover, down from 23,032,564 on 3/15/2011 (via Nasdaq.com). So someone covered. JOE's price/book ratio is now at 2.56, down from 3 in February.

There were decent housing numbers out today, month over month at least. In March, housing starts increased 7.2% to 549,000 from 512,000 (revised upward) in February (Briefing.com), and building permits increased 11.2% to 594,000 from 534,000 in Feburary (Briefing.com). Both beat expectations, but the long term charts still look horrible. Regarding JOE's Timberland assets, the price of Lumber is down 23% in a month (320 to 244). CUT and WOOD (timber ETFs) haven not broken down yet.

Here is interesting news about JOE's timber assets:
"The St. Joe Company Announces Sale of a 40,975 Acre Timber Deed to Resource Management Service

WaterSound, Florida - (April 1, 2011) - The St. Joe Company (NYSE: JOE) announced today that it has completed the sale of a 40,975 acre timber deed to an investment fund managed by Resource Management Service ("RMS") for a price of $55.9 million.

"This sale allows St. Joe to accelerate the monetization of a small portion of our standing timber, while retaining the ownership of the underlying land and the long-term options to capitalize on future real estate development opportunities," said Hugh Durden, interim Chief Executive Officer.

Under the terms of the timber deed, RMS has the right to harvest or sell the standing timber on specified stands for a period of up to 20 years. The ages of the timber deed stands range from 15 to 30 years, and are located in Gulf and Calhoun counties, Florida. As individual tracts of land are released by RMS following final harvest, the use of the land reverts immediately back to St. Joe for subsequent reforestation and ongoing timber production, rural land sales, or real estate development."

Articles on lumber and wood, since it is hot right now:
  • Time to harvest gains from lumber sector (FinancialPost)
  • Chinese Demand Lifts U.S. Wood Sales (WSJ)
  • Asia’s increasing demand for Wood drives Sawlog prices up in the US and Canada, Reports the North American Wood Fiber Review (NewsByCompany)
  • Collapsing lumber prices portend a weaker economy? (PragCap - Chart)
  • Lumber Futures Reverse Slide (WSJ)

Back to the options. Could someone be hedging a newly initiated short position? Selling calls betting on a sustained 200dma breakdown? I agree with others that St. Joe is a risky short given that shares are cornered by institutions and there is no credit event. Even if JOE is truly worth $7-15 per share, who knows what will happen. Any idea?

Disclosure: I do not own JOE shares or options.

Related Posts

Comments

HTML Comment Box is loading comments...