Pritzker battle clouds Hyatt IPO
Hyatt IPO had a successful open. But will Pritzker family struggles damper the stock? Should investors care?
It is often said that business and family should never mix. Eventually disagreements among siblings or parent/child can greatly damage a company that decides to mix the two.
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And yet family members still pursue this path despite the dangers.
What happens when those volatile family battles impact common shareholders? The shareholder loses.
That is why it is surprising to see such a warm reception for today’s initial public offering for shares of Hyatt Hotels (H). Shares priced in the expected range and then jumped by more than 10% once the stock began publicly trading.
The allure of attractive pricing relative to peers, combined with a bullish market environment, outweighed any concerns that may exist about Hyatt and the family squabbles of the Pritzker family.
The prospectus is very clear that disputes in the family may negatively impact shares, but investors seem to be unfazed by these warnings. As long as the profits are flowing, then does anything else matter?
The answer is yes -- it does. If a family dispute results in forced selling or dumping of shares that can push the value of H lower than current prices, it matters. Obviously the lawyers for the deal felt the issue was significant enough to mention in the prospectus.
How can you buy shares with such an overhang?
It is interesting that the Pritzker family retains voting control of the company ,despite the public offering of shares. This is the dirty little secret of the public equity markets.
The idea is that the general public will not care about such mundane things as control of the company. If you want to own the stock, this is the deal you get. We need more individual investors to say no to this sort of structural nonsense.
Here we have a company with very public disputes that could very well harm the company, yet it is this family that gets to keep voting control.
Ask yourself if Warren Buffett would accept such terms?
He would not. He would say take the family squabble to the back room and keep it away from the company. If you want my capital, you will do it my way and I will be the one in control.
Instead, Wall Street preys on Main Street, allowing for what ultimately will be a bad deal for the public to go forward.
I would stay away from this IPO simply based on the family dispute disclosure. You should do the same. Perhaps the game will change if enough people demand more from their public companies.
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Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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