NEW YORK (TheStreet) -- Strategic Hotels & Resorts (BEE) stock is sliding on Wednesday after the company priced its public offering of 36 million shares of common stock at $10.50 a share. Additionally, underwriters have been granted a 30-day option to purchase up to an additional 5.4 million shares.
The hospitality real estate investment trust said it estimates net proceeds of around $362.4 million (or $416.8 million if the underwriters exercise their over-allotment option). Proceeds will be used to fund the acquisition of a 63.6% ownership interest in the Hotel del Coronado, redeem all outstanding shares of its 8.25% Series C Cumulative Redeemable Preferred Stock, and for other general corporate purposes.
The offering is expected to close June 2, subject to customary closing conditions.
By midmorning, shares had tumbled 5.1% to $10.54.
TheStreet Ratings team rates STRATEGIC HOTELS & RESORTS as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate STRATEGIC HOTELS & RESORTS (BEE) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 308.33% and other important driving factors, this stock has surged by 28.27% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BEE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- STRATEGIC HOTELS & RESORTS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, STRATEGIC HOTELS & RESORTS continued to lose money by earning -$0.10 versus -$0.41 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus -$0.10).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 1404.0% when compared to the same quarter one year prior, rising from -$17.41 million to $226.98 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- You can view the full analysis from the report here: BEE Ratings Report