LuxUrban Hotels Announces Pricing of Public Offering of Securities

Rhea-AI Summary

LuxUrban Hotels Inc. (Nasdaq: LUXH) has announced the pricing of its public offering of 11,573,333 shares of common stock at $0.15 per share. The offering, expected to close around July 30, 2024, aims to raise $1,736,000 in gross proceeds, or $1,996,400 if the over-allotment option is fully exercised. Alexander Capital, L.P. is the sole book-running manager for this offering. LuxUrban intends to use the proceeds for working capital and general corporate purposes. The company, which operates hotels through Master Lease Agreements, is strategically building a portfolio in destination cities by capitalizing on commercial real estate market dislocations.

Positive

• Successful pricing of public offering, potentially raising up to $1,996,400
• Strategic expansion of hotel portfolio in destination cities

Negative

• Low share price of $0.15 may indicate market concerns
• Potential dilution of existing shareholders' equity
• Reliance on external funding for working capital suggests possible cash flow issues

Insights

Financial Analyst

LuxUrban Hotels' recent public offering raises some significant concerns for investors. The company is issuing a substantial 11,573,333 shares at a mere $0.15 per share, which signals potential financial distress. This pricing is remarkably low and suggests a severe dilution of existing shareholders' value.

The expected gross proceeds of $1,736,000 (or $1,996,400 if the over-allotment option is exercised) seem inadequate for a company operating in the capital-intensive hotel industry. This amount is likely insufficient for meaningful expansion or significant debt reduction, indicating that LuxUrban may be struggling with liquidity issues.

The company's business model of securing long-term operating rights for entire hotels through Master Lease Agreements (MLAs) is intriguing but capital-intensive. The need for this offering, coupled with its terms, suggests that the model may not be generating sufficient cash flow to sustain operations and growth.

Investors should be cautious. While the company frames this as an opportunity to capitalize on distressed commercial real estate, the terms of this offering suggest that LuxUrban itself might be in a precarious financial position. The extreme dilution and low share price could indicate a last-resort financing effort, which is rarely a positive sign for existing or potential investors.

Market Research Analyst

LuxUrban's strategy of targeting distressed hotel assets in destination cities is an opportunistic approach in the current market environment. However, the execution of this strategy appears to be facing significant challenges, as evidenced by this dilutive offering.

The hotel industry is experiencing a complex recovery post-pandemic, with varying performance across different segments and locations. LuxUrban's focus on destination cities could be a double-edged sword - while these markets often have high potential returns, they also face intense competition and can be more susceptible to economic downturns.

The company's Master Lease Agreement (MLA) model is an interesting twist on traditional hotel management contracts. In theory, it allows hotel owners to retain equity while offloading operational risks. However, the need for this offering suggests that LuxUrban may be struggling to generate sufficient returns from these agreements to cover its obligations and fund growth.

The extremely low offering price of $0.15 per share is particularly concerning. It indicates that the market has very low confidence in LuxUrban's prospects, which could create a self-fulfilling prophecy by making it more difficult for the company to secure favorable terms in future negotiations with hotel owners or lenders.

Investors should carefully consider whether LuxUrban's strategy can deliver sustainable returns in the highly competitive and cyclical hotel industry, especially given the apparent lack of investor confidence reflected in this offering.

MIAMI, July 26, 2024 (GLOBE NEWSWIRE) -- LuxUrban Hotels Inc. (“LuxUrban” or the “Company”) (Nasdaq: LUXH), which secures long-term operating rights for entire hotels through Master Lease Agreements (MLA) under which it manages the hotel and rents out, on a short-term basis, rooms to business and vacation travelers, today announced the pricing of its previously announced public offering of 11,573,333 shares of common stock at a price of $0.15 per share. The underwriters were granted an over-allotment option for up to an additional 15% of the shares of common stock sold in this offering.

Alexander Capital, L.P. is acting as sole book-running manager for the offering. The offering is expected to close on or about July 30, 2024, subject to the satisfaction of customary closing conditions.

The gross proceeds from the offering, before deducting the underwriters’ fees and other offering expenses payable by the Company, are expected to be $1,736,000 or $1,996,400 if the over-allotment option is exercised in full. The Company intends to use the proceeds from the offering for working capital and other general corporate purposes.

All of the shares of common stock were offered by the Company pursuant to a shelf registration statement on Form S-3 (No. 333-278883) (the “Registration Statement”) filed with the Securities and Exchange Commission (“SEC”) and declared effective on May 8, 2024 and which is available through the SEC's website at www.sec.gov.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of such state or jurisdiction.

A preliminary prospectus supplement has been filed, and a final prospectus supplement will be filed, with the SEC and, when available, copies of the preliminary and final prospectus supplement and accompanying base prospectus may be obtained from Alexander Capital, L.P., 10 Drs James Parker Boulevard #202, Red Bank, New Jersey 07701 Attention: Equity Capital Markets, Phone: (212) 687-5650, Email: info@alexandercapitallp.com or by accessing the SEC's website, www.sec.gov.

LuxUrban Hotels Inc.
LuxUrban Hotels Inc. secures long-term operating rights for entire hotels through Master Lease Agreements (MLA) and rents out, on a short-term basis, hotel rooms to business and vacation travelers. The Company is strategically building a portfolio of hotel properties in destination cities by capitalizing on the dislocation in commercial real estate markets and the large amount of debt maturity obligations on those assets coming due with a lack of available options for owners of those assets. LuxUrban’s MLA allows owners to hold onto their assets and retain their equity value while LuxUrban operates and owns the cash flows of the operating business for the life of the MLA.

Forward Looking Statements
This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). The statements contained in this release that are not purely historical are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Generally, the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this release may include, for example, statements with respect to the Company’s ability to successfully de-platform its properties from its former franchise partner and operate independently, its ability to improve its working capital and cash flow profiles, enhance its balance sheet and deliver organic revenue growth, scheduled property openings, expected closing of noted lease transactions, the Company’s ability to continue closing on additional leases for properties in the Company’s pipeline, as well the Company’s anticipated ability to commercialize efficiently and profitably the properties it leases and will lease in the future. The forward-looking statements contained in this release are based on current expectations and belief concerning future developments and their potential effect on the Company. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements are subject to a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results of performance to be materially different from those expressed or implied by these forward-looking statements, including those set forth under the caption “Risk Factors” in our public filings with the SEC, including in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 15, 2024, and any updates to those factors as set forth in subsequent Quarterly Reports on Form 10-Q or other public filings with the SEC, the base prospectus comprising part of the Registration Statement and when filed, the prospectus supplement filed with respect thereto. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.

Contact
Devin Sullivan
Managing Director
The Equity Group Inc.
dsullivan@equityny.com

Conor Rodriguez, Analyst
crodriguez@equityny.com

FAQ

How many shares is LuxUrban Hotels (LUXH) offering in its public offering?

LuxUrban Hotels (LUXH) is offering 11,573,333 shares of common stock in its public offering.

What is the price per share for LuxUrban Hotels' (LUXH) public offering on July 26, 2024?

The price per share for LuxUrban Hotels' (LUXH) public offering on July 26, 2024, is $0.15.

When is the expected closing date for LuxUrban Hotels' (LUXH) public offering?

The expected closing date for LuxUrban Hotels' (LUXH) public offering is on or about July 30, 2024.

How much does LuxUrban Hotels (LUXH) expect to raise from its public offering?

LuxUrban Hotels (LUXH) expects to raise $1,736,000 in gross proceeds, or $1,996,400 if the over-allotment option is fully exercised.

What will LuxUrban Hotels (LUXH) use the proceeds from the public offering for?

LuxUrban Hotels (LUXH) intends to use the proceeds from the public offering for working capital and other general corporate purposes.