Ashford to Delist Common Stock and Go Private

Ashford Inc. (NYSE American: AINC) announced that a special committee of independent and disinterested directors has recommended, and its board of directors has approved, a plan to terminate the registration of the company’s common stock under the federal securities laws following the completion of a proposed reverse stock split transaction immediately followed by a forward stock split transaction, and to delist its shares of common stock from trading on the New York Stock Exchange, American. This plan would be initiated in summer 2024, subject to Ashford’s stockholders approving the proposed transaction at a special meeting of stockholders to be held for that purpose.

Ashford says it is taking these steps to avoid the substantial cost and expense of being a public reporting company and to focus its resources on enhancing long-term stockholder value. The company anticipates savings exceeding $2.5 million annually because of the proposed transaction.

Ashford sponsors two select non-listed preferred stock offerings that have raised more than $100 million of aggregate investor equity.

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% premium above the common stock’s closing price on April 1, 2024, 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% 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.

According to Ashford, its special committee and its board 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% of the company’s outstanding common stock). 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, according to Ashford, is to: help it 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.

As of March 25, 2024, Ashford’s directors and executive officers owned approximately 37.9% of the issued and outstanding shares of the company’s common stock (including the Series D convertible preferred stock on an as-converted basis and the associated accrued and unpaid dividends) and are expected to vote “for” the proposed transaction.

After the special meeting, Ashford expects to terminate the registration of its common stock with the SEC and delist its common stock from the NYSE American. As a result, it will cease to file annual, quarterly, current and other reports and documents with the SEC, and stockholders will cease to receive annual reports and proxy statements.

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