Shareholder lawsuits against public companies rarely have an impact and because of that, they are rarely worth writing about. However, there was an interesting suit filed by shareholders of The St. Joe Co. that reached a federal appeals court last week.
The shareholders lost, of course, but it was interesting.
These stockholders sued because of a sharp drop in St. Joe's stock caused by comments made by hedge fund manager David Einhorn.
Einhorn is well known for very public fights against major companies. Just last week, he was in the news for taking on Apple Inc.'s board over the issue of giving back cash to shareholders.
In the fall of 2010, Einhorn was short-selling shares of St. Joe, the real estate development company that was formerly headquartered in Jacksonville. Short sellers borrow and then sell shares of stocks that they expect to fall. When the stock does drop, they buy shares at the lower price to pay off their debt, making a profit on the difference.
Einhorn trashed St. Joe at an investment forum in October 2010, saying the company's land holdings were overvalued. When investors learned that Einhorn was shorting St. Joe, that was enough to send the stock down by about 20 percent over two days. Then came the lawsuit.
Last year, a federal judge in Panama City dismissed the lawsuit and last week, a three-judge panel at the 11th U.S. Circuit Court of Appeals in Atlanta upheld that decision.
While the shareholders were arguing that St. Joe officials had failed to disclose pertinent information that Einhorn brought to light, the appellate judges ruled that Einhorn was only "repackaging" information already available to the public.
"David Einhorn was not an insider at St. Joe, and the information upon which he relied in making his bearish call had been public for months before he made the presentation," the ruling said.
"Einhorn was a maven of Wall Street, well known for accurately predicting the downfall of Lehman Brothers only two years prior. Given Einhorn's reputation, then, it is no great surprise that investors might flee like rats from a sinking ship upon news that he viewed a stock's prospects as grim," it said.
In other words, you can't sue the company just because one person's analysis sends the stock down.
The lawsuit also alleged that St. Joe was guilty of wrongdoing because of a disclosure in January 2011 that the Securities and Exchange Commission was investigating the company. The appellate court shot down that argument also.
"Though St. Joe's stock dropped 7 percent on the date the informal SEC investigation was announced and 9 percent on the date the order of private investigation was disclosed, the SEC never issued any finding of wrongdoing or in any way indicated that the company had violated the federal securities laws," the ruling said.
So once again, a shareholder lawsuit fails.
St. Joe in 'multiyear turnaround'
St. Joe also last week reported its yearend financial results. The company had a net loss of $8.6 million in the fourth quarter but had a profit of $6 million for all of 2012, its first annual profit since 2007.
Chief Financial Officer Tom Hoyer said in a conference call with analysts that he wanted to "re-emphasize that 2012 is just one year in a multiyear turnaround in which we intend to take advantage of an improving economy, the demand for affordable retirement living and commercial opportunities in our North Florida markets."
St. Joe, now headquartered in WaterSound, owns 567,000 acres of land in Florida. Its holdings are mainly in the Panhandle but it also is developing the RiverTown community in St. Johns County in Northeast Florida.
Hoyer said St. Joe is now looking to develop active adult communities to take advantage of the trend of retiring baby boomers.
"Fortunately, we have a lot of land located in attractive geographic areas in Florida that we think will work very well for those who want to try something new. We've spent a significant amount of time in 2012 planning our launch into active adult communities, and we expect to begin executing on our ideas this year," he said.
Atlantic Coast Financial deal has a twist
Speaking of shareholder lawsuits, Atlantic Coast Financial Corp.'s merger agreement announced last week has an interesting twist.
Jacksonville-based Atlantic Coast Financial agreed to a buyout by Bond Street Holdings Inc., a South Florida bank holding company, for $5 a share. However, stockholders won't necessarily get $5 a share.
Under the agreement, stockholders will receive $3 in cash per share when the deal is completed. The other $2 will be put into an escrow account that will be held for up to one year to pay any legal costs arising from stockholder claims against the company.
So instead of getting $5 a share, shareholders only know for certain they will get somewhere between $3 and $5 a share in total.
Atlantic Coast CEO Tom Frankland said he is not aware of any current shareholder suits and "we don't really anticipate anything," but the clause in the merger agreement enabled the company to get a better total price from Bond Street.
"To some degree, it acts as a deterrent" to shareholder lawsuits, he said. If Atlantic Coast accrues legal fees defending lawsuits brought by shareholders, that would ultimately lower the amount of money shareholders get from the merger agreement.
Atlantic Coast's stock had closed at $3.54 last Monday. It rose to $4.45 in early trading Tuesday after the merger announcement but fell back later in the day to close at $3.86. Obviously, investors were still trying to figure out what this all means.
And then there's the issue of current board member and former chairman Jay Sidhu, who has been disagreeing with other members of the board on how to run the company. Sidhu started a proxy fight last month, saying he was nominating three new directors for the board.
Sidhu did not say anything publicly about his position on the merger agreement last week and he did not respond to a voice mail message Friday. Frankland said he could not comment on Sidhu's position.
If the merger is completed, Atlantic Coast Financial will merge into Bond Street's bank subsidiary, Fort Lauderdale-based Florida Community Bank.
"We view it as a big plus for customers and the marketplace," Frankland said.
Florida Community Bank currently has 41 branches in South and Central Florida. Atlantic Coast Financial has 12 offices in Northeast Florida and Southeast Georgia.
Body Central CEO outlines plans
Body Central Corp.'s yearend financial report last week gave new CEO Brian Woolf a chance to introduce himself to investors.
"I've had a passion for women's apparel throughout my 40-year career," Woolf told analysts in the company's conference call Thursday.
"I believe that we have a unique opportunity to position Body Central within the fast fashion space as a sexy, edgy lifestyle brand, offering exceptional value to our customers. This positioning will enable us to more effectively serve our current customers while reaching a broader customer base. We are also building our management team, particularly in the areas of merchandising and marketing, to ensure that we have the support necessary to achieve our vision," he said.
Body Central announced the appointment of four new merchandising and marketing executives earlier last week.
Woolf said he has a three-pronged strategy for the Jacksonville-based women's fashion retailer, which overhauled its management team after a sales slump last year.
The first step is to establish Body Central's brand. "Overall, our merchandise assortment will always reflect a sexy, edgy lifestyle brand for all occasions and at amazing value," Woolf said.
The second step will be developing a new store prototype that will be less cluttered than the current layout.
"Our focus is to make the stores more aspirational, more exciting and easier to shop for our customers," he said.
Body Central, which recently closed its Jacksonville Landing store, will slow down store growth plans as it develops the prototype. The company currently has 276 stores in 26 states.
The third step will "create a multichannel experience with a consistent brand message across channels. We want our customers to have a consistent experience when they walk into our stores, open our catalog and visit our website."
Body Central reported final net income of 73 cents a share for 2012, down from $1.22 in 2011. As previously reported, comparable-store sales (sales at stores open for more than one year) dropped by 8.1 percent last year.
"At this point, we would expect comparable sales to remain negative for the first half of the year and end up negative for the full year, even though sales trends should improve during the last half of the year," Chief Financial Officer Tom Stoltz said in the conference call.
Stoltz said Body Central is not making an earnings forecast for 2013 as the new management team settles into place.
Landstar still sees uncertainty
Landstar System Inc. decided not to make any predictions for 2013 when it issued its yearend financial report in January, citing economic uncertainty.
In the Jacksonville-based trucking company's midquarter update conference call last week, CEO Henry Gerkens still wouldn't make a specific forecast.
"In my opinion, economic and industry indicators appear to be inconsistent. From Landstar's perspective, revenue from certain flatbed and other industrial-based accounts has been a little softer than I anticipated. In addition, weather in the first two months of 2013 has been more of a negative factor than in the first two months of 2012," Gerkens said.
"Despite the slow start to the year, I believe Landstar will finish strong. Our revenue goal for the 2013 full year remains to surpass the $3 billion mark in revenue," he said.
Landstar reported revenue of about $2.8 billion in 2012.
Publix rumored to be interested in Harris Teeter
Bloomberg News reported last week that Publix Super Markets Inc. is interested in buying Harris Teeter Supermarkets Inc. The report cited "people with knowledge of the situation."
If that happens, it wouldn't have a big impact on the Jacksonville market. North Carolina-based Harris Teeter has only one remaining Northeast Florida store, in Fernandina Beach.
In its annual report filed last week with the SEC, Lakeland-based Publix reported total sales in 2012 rose 1.9 percent to $27.5 billion and comparable-store sales rose 2.2 percent.
Net income for the year rose 4 percent to $1.55 billion, or $1.98 per share.
Regency Square occupancy stable
In its fourth-quarter report to investors, General Growth Properties Inc. did not give an occupancy level for Regency Square Mall.
However, in its annual report filed with the SEC last week, General Growth listed Regency's occupancy at 60.2 percent, the same occupancy it reported at the end of the third quarter.
Chicago-based General Growth operates 126 regional malls across the U.S.
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