In this interview with William Green, Joel Greenblatt explains how investors can get completed blindsided through no fault of their own. Here’s an excerpt from the interview:
Greenblatt: I wanted to do a good job and I saw this opportunity where Florida Cypress Gardens was being taken over and there was a nice spread in that deal where I could make a lot of money if it went through.
And I thought the deal made a lot of sense and at the time. And so I was able to have a big smile on my face and buy Florida Cypress Gardens as one of the first investments I made when I went out on my own.
And a few weeks before the deal was supposed to close unfortunately Florida Cypress Gardens fell into what’s called a sinkhole, meaning the main pavilions of large Cypress Gardens literally fell into a hole that appeared out of nowhere.
And apparently that happens a lot in Florida. I wasn’t that familiar with it thank God I wasn’t at Florida Cypress Gardens when it happened.
But the Wall Street Journal wrote a really humorous story about it and I was like why is this funny? I’m about to lose my business.
I had taken a pretty decent sized bet in this deal, and so it just tells you things can happen that you don’t anticipate. That it’s not really your fault.
I had never even heard of a sinkhole before I read about this happening. So it’s like a risk that when you’re doing a merger deal you’re not really saying risk of sinkhole is in your checklist of things to look for.
And so stuff happens. There’s less kind words for that. And it’s a good lesson to learn especially out of the box. So I was sweating pretty good. They ended up re-cutting the deal at a lower price and I lost money, but not that terrible.
Howard Marks is… my favorite line from Howard Marks is always – experience is what you got when you didn’t get what you wanted.
And I always loved that line and that’s what I got in Florida Cypress Gardens. Some great experience.
You can watch the entire discussion here:
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