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Sure, Hilton’s got the name recognition, the glamour… but it’s also associated with Paris Hilton, and now the real possibility of an insider buying fiasco. Blackstone may want to seriously consider changing the Hilton name. Its one thing for Paris Hilton to drag the Hilton name through the mud… she, allegedly doesn’t know better. But, should it come to light that insiders played unfairly before the buyout news, the Hilton name could be as good as mud.
On a low volume July 3, 2007, shares of Hilton had unusually high volume of 7,461,700 versus daily average volume of 3,360,000. The stock had a day low of $33.32, and closed at $36.05, just hours before the announcement that Blackstone would pay $47.50, or a 32% premium over the close. Plus, there was a monster surge in option trading. Even implied volatility spiked, coming in at a reported 40.8% -- the highest since October 2005.
Be sure that once Hilton announced the buyout news, eyebrows rose. There was an obvious leak of information that seemingly and allegedly forced Hilton to announce the news at such a peculiar time – the night before July 4th.
It’d be nice if the playing field were a bit more leveled for retail investors. But that’d be asking too much… Other hotel names to keep on radar following the HLT news include Starwood Hotels (HOT), which if bought at the same multiple of HLT’s buyout would value HOT at about $87 a share. Intercontinental Hotels Group (IHG) may also be worth a look.
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