Skift Take

Selina's stock price stabilized on Monday after a sharp drop to an all-time low on Friday. The chain of premium hostels and coworking spots is taking steps to escape penny-stock status.

Selina‘s stock price is swinging dramatically as it undergoes a turnaround and attempts to escape from penny stock status. The hostel chain saw its shares fall 41% on Friday, though they rebounded 9.3% on Monday.

“We suspect that some of the selling pressure may be related to the unlocking of shares on August 18,” said a Selina spokesperson in response to a Skift query.

Roughly half of the company’s issued shares had been locked against trading until October, the company’s anniversary of going public. At least one major shareholder, Bet on America, insisted on getting the lock-up released earlier in exchange for okaying the company’s turnaround strategy, according to a financial filing on Friday.

The stock price drop also happened after Selina said on Friday that another 8.6 million shares could be hitting the market soon — equivalent to roughly 7% of shares outstanding. Selina turned convertible notes into stocks and made other similar maneuvers.

Escaping Penny Stock Status

Selina has not received a delisting notice from the Nasdaq nor had a need to evaluate doing a reverse split, the company said.

Two other hospitality companies — Sonder and Vacasa — have seen their stock prices also go to penny stock status in recent months. Like Selina, they went public via SPACs, or special purpose acquisition companies. Sonder and Vacasa received delisting notices in April. Sonder will, in mid-September, ask shareholders to okay a reverse split to push its share price up above $1 and give it more time to have its turnaround plan produce results.

Selina will want to avoid Sonder’s and Vacasa’s situations.

If Selina’s stock remains below $1 for a month, the Nasdaq exchange will issue a notice of a plan to delist the shares from trading. Selina will have 180 days to push the value of shares higher. By then, it may have more good news to report.

Still, a delisting notice might prompt the company to pursue a reverse split, said Alan Woinski, editor of Skift’s Daily Lodging Report newsletter.

“The odds of Selina shares rebounding from this and being able to maintain a stock price above $1 bid for an extended period of time are not good, particularly considering what has occurred in other hospitality-related SPACs,” Woinski said. “At the same time, the company faces the likelihood of needing to raise more funding in the future, and a share price in the $5 range or above would help with that, also adding to the speculation that a reverse split is needed.”

Turnaround Plan

Selina debuted as a public company in October 2022 at a $1.2 billion valuation but was hovering around only $55 million on Monday. The chain of 118 premium hostels has shifted from being a venture-backed growth startup to a public company where quarterly profits are expected.

In late June, it said it would receive up to $50 million in capital led by Global University Systems (GUS), which runs for-profit universities. It has already received the first $10 million of a phased injection.

Selina said in late June that its first-quarter revenue was up nearly 32%, while its quarterly net loss had narrowed by one-fourth year-over-year to $30.3 million. It had $23 million of cash on hand at the end of March.

On Monday, Selina announced it had signed a deal with Globant, a tech firm. Globant will offer discounts on leisure stays as an employee perk to its 27,000 workers and alumni in Latin America with a typical age of 30. Selina seeks more such co-marketing deals with corporations, music promotion companies, and educational institutions.

Earlier this month, Selina rolled out a perk for investors to buy its stock — discounts and freebies at its properties. The move temporarily boosted the share price.

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Tags: future of lodging, hostels, hotels, selina, spacs, stock market, stock splits, stocks

Photo credit: A guest room at the Hotel Selina Chelsea in Manhattan. Source: Selina.

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