8-K: Ashford Hospitality Trust Faces NYSE Delisting Threat, Announces 1-for-10 Reverse Stock Split

Ashford Hospitality Trust has received a notice from the NYSE for non-compliance with listing standards due to its low share price and plans a 1-for-10 reverse stock split to regain compliance.

Summary

• Ashford Hospitality Trust received a notice from the New York Stock Exchange (NYSE) on September 23, 2024, stating that the company is not in compliance with Section 802.01C of the NYSE Listed Company Manual.
• The non-compliance is due to the average closing price of the company's common stock being less than $1.00 over a consecutive 30 trading-day period.
• The company plans to notify the NYSE within 10 business days of the notice that it intends to cure the stock price deficiency.
• Ashford intends to execute a 1-for-10 reverse stock split to regain compliance with the NYSE's continued listing standards.
• The company has a six-month cure period to regain compliance, which requires a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of any calendar month during the cure period.
• The company's common stock will continue to trade on the NYSE under the symbol AHT, but with an added designation of '.BC' to indicate non-compliance.
• The notice does not affect the company's ongoing business operations, SEC reporting requirements, or trigger a breach of material debt obligations.
• The company can provide no assurances that it will be able to satisfy any of the steps outlined and maintain the listing of its shares on the NYSE.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the delisting notice and the need for a reverse stock split, indicating underlying issues with the company's stock performance. While the company is taking action, the situation is concerning.

Positives

• The company is taking action to regain compliance with NYSE listing standards by planning a reverse stock split.
• The company's operations, reporting requirements, and debt obligations are not immediately affected by the notice.
• The company believes the reverse stock split will benefit all shareholders by addressing several items impacting its common stock.
• The company anticipates that the reverse stock split will meaningfully increase the company's market price per share above the $5 per share threshold required by many institutions to hold shares.
• The company believes it can realize increased incremental demand for its common stock while also making the company's shares more attractive to a broader range of potential long-term institutional investors, individual investors, and buy-side analysts.

Negatives

• The company's common stock has fallen below the NYSE's minimum average closing price requirement.
• The company is at risk of being delisted from the NYSE if it does not regain compliance within the cure period.
• The company can provide no assurances that it will be able to satisfy any of the steps outlined and maintain the listing of its shares on the NYSE.

Risks

• The company may not be able to regain compliance with NYSE listing standards within the six-month cure period.
• The reverse stock split may not be sufficient to increase the share price to the required level.
• The non-compliance notice could negatively impact the company's reputation and the trading price of its stock.
• There is a risk that the company's business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in forward-looking statements.

Future Outlook

The company intends to execute a 1-for-10 reverse stock split to regain compliance with NYSE listing standards and believes this will benefit shareholders by increasing the share price and attracting a broader range of investors. However, there are no assurances that the company will be able to satisfy any of the steps outlined and maintain the listing of its shares on the NYSE.

Management Comments

• The Company plans to notify the NYSE within 10 business days of receipt of the Notice that it intends to cure the stock price deficiency and to return to compliance with the NYSE continued listing standards.
• The Company believes the reverse stock split will benefit all shareholders by addressing several items impacting its common stock.
• By implementing a reverse stock split, the Company and its Board of Directors believes it can realize increased incremental demand for its common stock while also making the Company's shares more attractive to a broader range of potential long-term institutional investors, individual investors, and buy-side analysts.

Industry Context

This announcement is not uncommon for companies experiencing a prolonged period of low share prices. Reverse stock splits are a common mechanism used by companies to regain compliance with exchange listing requirements. The hospitality industry has faced challenges in recent years, which may have contributed to the company's stock price decline.

Comparison to Industry Standards

• Other REITs facing similar share price issues have also implemented reverse stock splits to maintain their exchange listings.
• Companies like Washington Prime Group (WPG) and CBL Properties (CBL) have faced similar delisting risks and have taken similar actions.
• The 1-for-10 reverse stock split is a relatively common ratio for companies seeking to significantly increase their share price.
• The six-month cure period is standard for NYSE listing compliance issues related to share price.

Stakeholder Impact

• Shareholders face the risk of further share price volatility and potential delisting.
• Institutional investors may be hesitant to hold shares below $5 per share.
• The reverse stock split may impact the value of existing shares.
• The company's reputation may be negatively affected by the non-compliance notice.

Next Steps

• The company will notify the NYSE within 10 business days of its intent to cure the deficiency.
• The company will execute a 1-for-10 reverse stock split.
• The company must achieve a closing share price of at least $1.00 and an average closing share price of at least $1.00 over a 30-day period by the end of any calendar month within the six-month cure period.

Key Dates

Keywords

reverse stock split, NYSE, delisting, compliance, share price, listing standards, Ashford Hospitality Trust, AHT