What happened
Shares of Ashford Hospitality Trust (AHT -7.69%) had fallen more than 29% as of 11:30 a.m. EDT after the company announced preliminary revenue per available room (RevPAR) for the second quarter of 2021, and a 1-for-10 reverse stock split.
So what
Ashford Hospitality Trust, a real estate investment trust (REIT) that primarily invests in upscale hotels, announced RevPAR of $91.27 for the month of June, up 256% from June 2020, but down 37% from June 2019. It's also up from RevPAR of $75.66 for May 2021.
In other news, Ashford announced a 1-for-10 reverse stock split after market close July 2. What that means is that for every 10 shares investors own, they will instead have one share, thereby reducing the existing share count. So, if you own 1,000 shares of Ashford, you'll own 100 shares once the split occurs. The split doesn't change the value of the company, but will increase the share price.
Ashford's CEO Rob Hays said on Twitter that the company is doing the split because some funds can't hold stocks that trade below $5. Prior to the announcement of the split, Ashford traded below $4 per share. Hays also essentially said the low share price is not ideal for trading conditions.
Image source: Getty Images.
Now what
While reverse stock splits are not necessarily bad, the market usually does not take too kindly to them because they may suggest the company doesn't think it can get its share price up on its own. This is now the second reverse stock split Ashford has done within the last year and the company has spent most of the last year trading below $5 per share, so this is certainly concerning.
