Dallas-based Ashford Inc. announced plans to delist its common stock from trading on the New York Stock Exchange this summer. The company expects the move to save it $2.5 million per year.
Late on April 1, the company announced that its board of directors had approved a plan to terminate its common stock under federal securities laws following the completion of a proposed reverse stock split, which would be followed immediately by a forward stock split transaction.
Ashford said it is taking these steps to avoid the “substantial cost and expense of being a public reporting company and to focus the company’s resources on enhancing long-term stockholder value.”
According to a release from Ashford, "Ashford's Special Committee and its board of directors have determined that the costs of being a U.S. Securities and Exchange Commission reporting company outweigh the benefits and, thus, it is no longer in the best interests of the company and its stockholders, including its unaffiliated stockholders (consisting of stockholders other than executive officers, directors and stockholders who own more than 10 percent of the company's outstanding common stock) for Ashford to remain an SEC reporting company. Without its public company status, Ashford would have an ongoing cost structure befitting its current and foreseeable scale of operations, and its management would be able to focus on long-term growth without an undue emphasis on short-term financial results."
The purpose of the reverse stock split is to help Ashford reduce and maintain below 300 record holders of its common stock, which is the level at which SEC public reporting obligations are required; offer liquidity to smaller stockholders at $5.00 per share without a brokerage commission; and provide all stockholders the opportunity to vote on this matter.
The proposed reverse stock split is a 1-for-10,000 split, in which holders of less than 10,000 shares of the company’s common stock in any one account immediately prior to the reverse stock split would be cashed out at a price of $5 per each pre reverse stock split share. Such price represents a 125.2 percent premium above the common stock’s closing price on April 1, and is supported by a fairness opinion provided by Oppenheimer and Co. Inc.
Stockholders owning 10,000 or more shares of Ashford’s common stock in any one account immediately prior to the reverse stock split would not have any shares cashed out and would remain stockholders in Ashford, which would no longer be a public reporting company. The number of shares they would own following the proposed transaction would be unchanged, as immediately after the reverse stock split, a forward split of 10,000-for-1 would be applied to the continuing stockholders, negating any effects to the number of shares held by them.
Ashford estimates that approximately 1.1 million shares (representing approximately 31 percent of the shares of common stock currently outstanding) would be cashed out in the proposed transaction and the aggregate cost to the company would be approximately $5.5 million, plus transaction expenses, which are estimated to be approximately $6.7 million. Ashford intends to fund such costs using cash on hand.
Ashford's Debt
Ashford Hospitality Trust put 12 of its hotels up for sale earlier this year as it looked to pay off debt due in January 2026.
Ashford’s plan includes raising sufficient capital through a combination of asset sales, mortgage debt refinancings and non-traded preferred capital raising. Through the asset sales, Ashford intends to generate incremental proceeds, which will be used to pay down the strategic financing, to deleverage the balance sheet and for general corporate purposes.
According to The Real Deal, just a day before the April 1 filing, two of those distressed properties in Plano, Texas, were listed for a foreclosure sale—a 152-key Courtyard Dallas Plano and a 126-key Residence Inn Dallas Plano/Legacy.