Nothing is Going This REIT Activist’s Way

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Ashford Hospitality Prime’s chairman and CEO Monty Bennett had a reason to smile last week. A legal dispute in Dallas, TX between Ashford Prime and Sessa Capital, a major shareholder and an activist hedge fund, favored Ashford. The Court decision prevents Sessa from potentially seizing control of the company’s board of directors. The Court stated that “Sessa’s slate of candidates is invalid and ineligible to stand for election to Ashford Prime’s board at the 2016 annual meeting.”

If nothing changes, Ashford Prime will be electing its nominees for board of directors next June 10 and Sessa will have no right to solicit proxies. Both are looking for strategic ways to eliminate share price discount, but they don’t agree in how to fix it.

Obviously, nothing is going Sessa’s way. It is not clear if they are willing to wait to gain from Ashford Prime investment, and this is why they are demanding a quick sale of the company. All that is clear is Sessa interests are not aligned to Ashford Prime interests.

The fight hasn’t been good for the business. The stock has been affected negatively. Just last week, it had a drop of 10%.

This leaves Sessa with two basic options, to back out or stay fighting. If they back out, they will not be able to realize an investment gain that is long gone. This is because since last year the stock has been down by more than 30%, meaning they will experience a huge loss.

A third option is Sessa may decide to negotiate with Ashford Prime to come up with a reasonable deal. It is likely that Ashford will agree to the idea, because as long as they at war, loss will be inevitable. Ashford even posted a draft confidentiality agreement on the company’s website to begin the settlement discussions.

Sessa announced they will appeal the Court’s decision.

Source: Ashford Hospitality Prime, Inc(NYSE:AHP), Fast Graphs

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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