SPPR will have difficulty growing but it is a long way from worthless. It has two paths going forward, a sale or merger with another REIT or getting the preferred shareholder to convert some of its holdings to common. Without this show of faith from Elsztain it will be a long turn around. It could get merged out in the $8 range.
SPPR sold 7 Savannah Suites for $22.5 million and got back the $850,000 of escrow that it had put up for the purchase of hotels. This isn't the jump start that it would have gotten from the now cancelled stock offering but it won't come with the dilution.
There is a very real cost to being a public company. SPPR had shrunk in size because of some poor purchases at the top of the market plus the need to sell some older properties that would have taken more to bring up to the franchisor's standards than it was worth. There is a very real need to grow and that takes capital thus the need for a stock offering. That could not happen with a stock price near a dollar thus the need for the reverse stock split. It just had to happen. With a huge offering on the horizon and a very small ownership base (many who are insiders and can't buy or sell SPPR while a stock offering is in the works or other inside information is available) there has been nothing to prop up the stock price. The value of a share of SPPR is arguably between $8 and $10. The stock has traded as high as $9.84 (split adjusted) as recently as March 22 this year.
Ordinarily a stock offering would come out at a discount to recent trades but to me this is an unusual situation. The size of the proposed offering is so large that it is comparable to a IPO and should be priced at a discount to the per share value of the company rather than a discount to the stock price. If this is done and I hope it will be (or the dilution of the offering will be a killer to all present shareholders), then this artificially low price is a real buying opportunity.