Ashford Inc., the Dallas-based company managing hospitality real estate assets under the leadership of Monty Bennett, has officially ended its tenure as a public company. On July 22, shareholders voted to terminate the registration of the company’s common stock and to delist its shares from the New York Stock Exchange (NYSE). The company’s last trading day on the NYSE American is set for Friday, July 26.
Motivations for Going Private
The decision to transition to a private entity is driven by a strategic plan revealed in April. By going private, Ashford Inc. aims to avoid the substantial costs associated with being a public company, expecting to save approximately $2.5 million annually. The reduction in regulatory compliance and public reporting requirements is anticipated to streamline operations and focus resources on growth and development.
As part of this transition, shareholders have approved a complex stock split process. This involves a 1-for-10,000 reverse stock split followed by a 10,000-for-1 forward stock split. This arrangement will cash out shareholders owning fewer than 10,000 shares at a price of $5 per share. According to Hotel Investment Today, this process will result in approximately 1.1 million shares, representing about 31% of the outstanding common stock, being cashed out.
Implications for Associated REITs
Ashford Inc. oversees two publicly traded real estate investment trusts (REITs): Ashford Hospitality Trust Inc. (NYSE: AHT) and Braemar Hotels & Resorts Inc. (NYSE: BHR). This year, Ashford Hospitality Trust faced a significant proxy fight with activist investor Blackwells Capital LLC. Blackwells accused the AHT board of not acting in the best interests of shareholders, pushing for the removal of Monty Bennett. Despite these efforts, Bennett remained as executive chairman even after he and another board member failed to secure enough votes for re-election. The remaining board members opted not to accept their resignations.
A potential conflict was also anticipated between Braemar’s board and Blackwells. However, this was averted on July 2 when the companies announced a “cooperation agreement.” As part of the agreement, Blackwells agreed to withdraw its director nominations and vote alongside Braemar at the REIT’s 2024 annual shareholder meeting. Furthermore, Blackwells plans to purchase an additional 3.5 million shares of Braemar, leading to the addition of an independent director to the board, with Blackwells having input in the selection process.
Market Performance and Financial Outlook
On July 25, Ashford Inc. shares closed at $4.96, reflecting a nearly 35% increase year-to-date. However, the stock has declined more than 46% over the past 12 months. As of July 25, Ashford’s market capitalization was approximately $17.1 million. In 2023, Ashford reported revenues of $746.8 million, showcasing the scale and reach of its operations in the hospitality sector.
Strategic and Operational Implications
Ashford Inc.’s transition to a private entity reflects a broader trend among companies seeking to reduce the regulatory and financial burdens associated with public market scrutiny. For Monty Bennett and Ashford Inc., this move is designed to streamline operations, allowing the company to focus on long-term strategic goals without the pressures of quarterly earnings reports and activist investors. The expected cost savings and simplified corporate structure are anticipated to enhance the company’s ability to navigate the competitive hospitality sector more effectively.
Broader Industry Impact
Ashford Inc.’s decision to go private also highlights a strategic pivot in the broader hospitality real estate sector. By reducing the complexities and costs associated with being publicly traded, companies like Ashford can allocate more resources towards innovation, development, and expansion. This move may influence other companies in the sector to consider similar transitions, particularly those facing significant operational challenges and investor pressures.
Conclusion
The transition of Ashford Inc. to a private entity marks a significant strategic shift for the company. While it reduces the complexity and costs associated with being publicly traded, it also reflects a tactical response to the challenges posed by activist investors. As Ashford Inc. moves away from public markets, its future strategies and operations will be closely monitored by industry stakeholders and investors in the hospitality real estate sector. This move is expected to position the company for sustained growth and operational efficiency, leveraging the benefits of a streamlined corporate structure and reduced regulatory burdens.