Author Topic: AINC - Ashford Inc  (Read 561 times)

kab60

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AINC - Ashford Inc
« on: Today at 06:30:43 AM »
I have a position in this Company and broke my rule of not investing with scumbags because I was simply attracted to the valuation and situation. Greenhaven Road describes it pretty well in some of his letters (luckily I was in much cheaper than he was), but it's a bit like the Portnoy Family/RMR Group.

Shady management spins off the golden goose (asset management business) that has long term and favorable contracts with listed REITS (Ashford Trust and Braemer).

While Ashford Trust and Braemer would be better off buying back shares, incentives are stacked so that it's growth for whatever it takes. That's obviously bad for the listed REITS but golden for the capital light asset management business (Ashford Inc) where management seems to have concentrated most of its wealth.

Add in a shady transaction (Ashford Inc buying private project management biz owned by CEO and his father) and it screams stay the hell away.

So many things are wrong with this situation, but the bet is basically that they'll be more incentivized to bolster the share price of Ashford Inc than continuing to siphon off wealth from shareholders since they're now the biggest.

They seem like pretty savy operators and have recently launched a version of "key money" that looks pretty clever, but they did a surprising capital raise and market definitely doesn't like it.

Obviously not without merit, but fundamentally it's a very attractive business model even though I don't like companies that screw their partners (listed REITS) or shareholders.

I think the problem now is that the equity of the listed REITS is valued so low that issuing shares to buy more properties is pretty much impossible and thus hinders growth. Not that I think one needs much of that here.

I might have gotten myself into too deep water, but I'm sure some of you guys have taken a look as well. So what'd you see? :D


mateo999

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Re: AINC - Ashford Inc
« Reply #1 on: Today at 01:04:10 PM »
I own it too, and am down about 22% on my basis.  But with that said, the volumes are so thin that a small amount of institutional capital can drive this either way.  Thankfully I never made it a large position given the scum factor, and shouldn't have gotten involved after seeing Raging move on.

Interestingly, I was able to join Monty at a roundtable lunch at the October Investor Day, where he seemed dismayed that they were forced to raise equity at $74.50 (which had been a considerable discount to trading-- mid 80s, low 90s-- in days leading up to the offering).  I just don't trust this management team.  When you speak with them (I attended the 2017 Investor Day as well), nobody admits there's anything wrong (either in reality or perception).  It's all sunshine and roses.  Also, clearly the market doesn't care about the key money Enhanced Return Funding ProgramTM concept.
« Last Edit: Today at 01:06:03 PM by mateo999 »