What: Shares of hotel company La Quinta Holdings Inc (NYSE:LQ) dropped as much as 17% Friday morning after the CEO's sudden departure was announced.
So what: A press release from La Quinta said CEO Wayne Goldberg's departure came about via "mutual agreement," but its sudden nature has investors and analysts wondering if there's really more to the story. Keith Cline, the company's chief financial officer, was named interim president and CEO. A company filing with the SEC said La Quinta entered into a "separation and release agreement" with Goldberg that includes entitling Goldberg to "a lump sum cash severance payment equal to three times Mr. Goldberg’s base salary and bonus, as set forth in his employment agreement with the Company treating Mr. Goldberg’s departure as a termination by the Company without 'Cause' or by Mr. Goldberg for 'Good Reason,' for a total of $7,560,000."
To make matters worse, management also lowered guidance for the full year. Revenue per available room growth guidance was lowered a full percentage point to a range of 3.5% to 4.5%. Pro forma adjusted EBITDA was also lowered slightly to $393 million to $400 million for the year.
On a positive note, the Board of Directors did approve an acceleration of share buybacks to the tune of $100 million.
Now what: There seems to be more mystery than anything surrounding La Quinta's shares today. Goldberg had been with the company for 15 years and was CEO for nearly a decade, so leaving abruptly is certainly a surprise.
I would like to say that the drop in shares despite only a small reduction in guidance is a buying opportunity, but the company's enterprise value is still 13 times EBITDA and growth appears to be slowing. That's not a good enough value given the company's uncertainty so I would wait for answers before jumping into this hotel chain.