I keep hearing this refrain from people. Because JOE was a teenager a few months ago and now sits in the mid 20’s, people can’t fathom why Berkowitz would pay current prices for the rest of the company or even a portion of it. The reason he was not a huge buyer during that time period was because of a standstill agreement he had with the board. I maintain he would now (the agreement is gone), at least to get over the 30% ownership hurdle to call a special meeting to propose his own slate of director and maybe even over 50% to just guide the vote himself.
So, in order to make a point either way, we need to see where and when Bruce has bought in the past. Since he is admittedly very long term in this one, the company’s specific circumstances in any given purchase period aren’t wholly relevant as he is looking years down the road anyway.
In October 2010 he added 135k shares at $22 a share
In October 2009, he added 600k shares at prices between $26 and $28 a share (the price range for than month)
In April 2009 he added ~6m shares between $22 – $25
In Jan 2009 he added ~3M shares art prices ranging from $24-$25 a share
So, it would seem today’s $25 price tag is not an automatic deal killer for Berkowitz as he has been buying in this range over the past few years. Florida housing prospects have not dramatically worsened over the past year and a half and in all reality based on the 2nd half of 2010, you could make the argument they are better now that they were in 2009. So, paying the same price for shares now means he is buying them with better prospects for the company than it had in 2009.
My opinion is that he resigned from the Board to acquire more shares to propose his own slate of directors. Now that he is no longer considers for the Board he can solicit support from Janus who recently upped its stake to 13% and T Rowe who owns 14%. Attaining their support (assuming he buys the additional 1.1% he need to me over 30% to call special meeting) is all he needs to replace the Board. I can’t fathom how either would rather have the current slate there rather than Berkowitz & Co.
Buying more for Bruce here isn’t a simple valuation play at the moment. This is about control and the future of the company. For Fairholme shareholders (and by association JOE holders) paying more for shares now to direct the future of the company is by no means a foolish thing to do and in all reality, if it means a partial sale, huge JV or partnership, (that may be what the current slate is rejecting) it is the right thing to do.
Remember, Bruce is looking at the value here over the next several years, not tomorrow. That guides his thinking and valuation.