Shares of real estate investment trust (REIT) Ashford Hospitality Trust (NYSE: AHT) dropped 17% in early trading on July 19. Roughly an hour into the trading day the stock was still down around 12%. There are two big factors here; one remains out of the hotel landlord's control and the other was well within it.
First the easy news to digest. After the close on July 16, the end of the prior week, Ashford announced that its 1-for-10 reverse stock split had been completed. Technically speaking, a stock split doesn't change an investors ownership of a company, so all that happens is the stock price changes. A reverse split results in fewer shares outstanding and, thus, increases the share price. This is a desirable outcome because Ashford's stock price had been lingering at a very low level, which can dissuade investors from buying shares. The low level of the stock price, meanwhile, has been driven by the financial headwinds the REIT has been facing during the coronavirus pandemic (first quarter revenue was lower by nearly 60%). So, all in, this reverse stock split is really a net negative and investors, not surprisingly, aren't pleased.
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Why Ashford Hospitality Trust Fell as Much as 17% in Early Trading Today