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Ashford Inc. Innovates by Announcing Private Retreat from Public Market


Leo Gonzalez

April 2, 2024 - 02:55 am


Ashford Inc. Charts a New Course: Exiting the Public Market Post Reverse-Forward Stock Split

DALLAS, April 1, 2024 /PRNewswire/

In a strategic move to enhance long-term shareholder value, Ashford Inc. (NYSE American: AINC) today confirmed that its Board of Directors, acting on a recommendation from a Special Committee of independent directors, has endorsed a plan to withdraw its common stock from the public market. This announcement follows a contemplated reverse stock split, anticipated to be in effect by the summer of 2024, pending approval from Ashford's shareholders at a forthcoming Special Meeting.

As the real estate investment and management juggernaut Ashford Inc. has opted to retract its common stock from federal securities law registration after executing a proposed reverse stock split. With the Board's authorization, this plan will be pursued, subject to the green light from Ashford stockholders, by orchestrating a reverse stock split immediately succeeded by a forward stock split. If the roadmap garners stockholder approval, Ashford will subsequently request cessation of its common stock trading on the NYSE American LLC.

Ashford is adopting this blueprint to sidestep the substantial monetary outlay and substantial dedication of resources that come with being a publicly-listed entity. The potential cost savings are significant, exceeding $2.5 million annually if the anticipated transaction unfolds as planned.

The reverse stock split proposal outlines a 1-for-10,000 split precedent, resulting in the cash-out of shareholders holding less than 10,000 shares for a remuneration of $5.00 per pre-split share. Considering the share's closing rate on April 1, 2024, this approach offers a 125.2% premium. A fairness appraisal provided by the financial services firm Oppenheimer & Co. Inc. supports the proposed buy-out price.

In stark contrast, shareholders possessing a minimum of 10,000 shares in any single account immediately before the reverse split would continue as investors in a privately-held Ashford, sans the fiscal drag and distractions of public company status. These shareholders would maintain their share count, stable through the following immediate forward split of 10,000-for-1, which effectively nullifies the reverse split's alteration in ownership stakes. Approximately 1.1 million common shares, equating to nearly one-third of the currently outstanding shares, are estimated for cash-out under the transaction, which Ashford expects to finance through its available cash reserves.

The Special Committee and Board of Directors of Ashford believe the expenses of remaining as a U.S. Securities and Exchange Commission (SEC) reporting company overweigh the benefits. They advocate that stepping down as a public entity best serves the company and unaffiliated stockholders’ interests, expecting the company to acquire a cost structure fitting its present and foreseeable operational scale. By eliminating public company obligations, management can set its sights on sustainable growth without succumbing to the pressures of short-term fiscal benchmarks. The reverse split's goals include maintaining fewer than 300 record holders of common stock to alleviate mandatory public reporting, extending shareholders an opportunity to divest their minor holdings at a premium cost-free from brokerage commissions, and putting the matter to a democratic stockholder vote.

Among the Board's considerations were:

  • The considerable recurrent expenses and managerial resources mandated for public company status, compliant with SEC filings, and regulatory norms like the Sarbanes-Oxley Act;
  • The meager trade volumes and liquidity characterizing the company's common stock;
  • The foresight that the company's operations would continue unabated, yet without the weight of public listing expenses;
  • The allowance for minor shareholders to liquidate at premiums without brokerage detriments;
  • The impartial valuation of the proposed fractional share consideration by Oppenheimer, affirming financial fairness for unaffiliated stockholders;
  • The anticipation of enhanced focus on long-term progress and shareholder value, absent the regulatory distractions and commitments post-deregistration and delisting.

Pending stockholder approval at the Special Meeting scheduled in the summer of 2024, Ashford will initiate the withdrawal of its common stock registration. Endorsing the reverse split necessitates a company common stock majority vote, considering the Series D Convertible Preferred Stock on a converted basis, and excluding abstentions and broker non-votes from the vote count.

The Proposed Transaction falls under what is termed a "Rule 13e-3 transaction." This involves a sequence of deals that likely triggers a registered equity class to become eligible for registration cessation or reporting suspension, or to withdraw from a national securities exchange listing. Consequently, during the mentioned Special Meeting, shareholders will vote not only on the reverse-forward stock split but also on approving an exemption to a clause prohibiting Rule 13e-3 transactions within an Investor Rights Agreement from November 6, 2019. Significant stakes in the company, approximately 37.9%, are held by directors and executive officers, who have signaled affirmative voting intentions for the transaction.

Commencing after the Special Meeting, Ashford envisions deregistration of its common stock and delisting from the NYSE American. Once the waiting times mandated by federal law lapse, Ashford will end its SEC report filings, and the common stock will vanish from NYSE American trading.

Investors holding "street name" shares should engage their financial institutions or brokers for transaction effects on their account holdings. Changes in the reverse-forward split ratios may occur at the Board's discretion to achieve the sub-300 holder target, and the transaction may yet be halted if the Board's perspective on stakeholder advantage changes.

Important Reference Materials for Shareholders

Additional Information and Where to Find It

This press release, serving as a preliminary description of the Proposed Transaction, does not equate to a proxy request, solicitation, or any offer to buy or sell Ashford's common stock. The company is preparing to file a proxy statement and other pertinent materials, including a Schedule 13E-3, with the SEC regarding the Proposed Transaction. All definitive proxy documents will be dispatched to stockholders in advance of the Special Meeting. All stockholders should peruse the forthcoming proxy statement, along with all related SEC filings, upon their availability due to the inclusion of crucial transaction data.

Furthermore, these materials will be accessible, without charges, from the SEC’s website at WWW.SEC.GOV. The proxy statement and accompanying documents will be made available, also without cost, upon request directed to Ashford Inc.'s Dallas, Texas office.

The company’s affiliates, directors, and executive officers are to be regarded as participants in the process of proxy solicitation associated with the Proposed Transaction. The proxy statement, once prepared, will outline information about these participants. Any changes in their holdings relative to what's documented in the proxy statement will be disclosed in SEC-filed Statements of Change in Ownership on Form 4. Additional specifics relating to participant interests in the solicitation will be included in the SEC-filed proxy statement.

Ashford's CEO Monty J. Bennett and other senior management may engage in open market transactions of the company's common stock subsequent to the public announcement of the Proposed Transaction. Such activities will be duly reported in accordance with the law.

Forward-Looking Statements

Statements made in this press release include forward-looking declarations pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to the company's strategies and plans. However, these statements are subject to risks, uncertainties, and assumptions, many outside Ashford Inc.'s control and potentially subject to change due to various events or factors. Any variations could potentially impact business operations, financial condition, liquidity, and overall company objectives in a materially distinct manner from the current forward-looking statements. Investors should not over-rely on these forward-looking statements, as actual outcomes could diverge substantially. Though based on information currently available, these statements can be influenced by changing circumstances, warranting acknowledgment of associated investment risks. The company is not obliged to revise publicly any forward-looking statements unless necessitated by law.

Contact Information

For further inquiries, please refer to the official communication channels listed below:

SOURCE: Ashford Inc. 14185 Dallas Parkway, Suite 1200, Dallas, Texas 75254