McLEAN, Virginia—Hilton Worldwide Holdings shares opened at $21.30 and were trading on the New York Stock Exchange for $21.60 as of press time Thursday, one day after Blackstone Group realized one of the largest private-equity buyouts ever.
Hilton Worldwide Holdings priced its initial public offering at $20 per share after the markets closed Wednesday and reportedly sold more than 117 million shares, raising $2.34 billion.
Based on the $6.5 billion that Blackstone invested into Hilton, the $20-per-share opening price would value Blackstone’s investment at an unrealized gain of $8.5 billion.
Hilton filed for its IPO on 12 September 2013.
It was the largest IPO for a hospitality company ever, topping Hyatt Hotels Corporation’s $950-million IPO in 2009 and Extended Stay America’s $565 million in November.
Green Street Advisors Analyst Lukas Hartwich said Hilton hit no snags on its first morning as a publicly traded company.
“It’s not too surprising to see the stock trade up from the IPO price given the level of interest in the company,” he said.
A Morningstar’s report released Thursday said Hilton’s future strategy is sound but its initial stock value is overpriced.
“A lack of a compelling valuation prevents Morningstar from recommending the stock to investors with a long-term investment horizon,” said Morningstar Equity Analyst Chad Mollman in the report. “Our fair value estimate of $16 per share represents an 18% discount to the midpoint of the proposed offering range of $18 to $21 per share.”
Hilton CEO Christopher Nassetta told CNBC’s “Squawk on the Street” that Hilton’s objective “is to become investment-grade within the next two to three years.”
HLT on the NYSE
Hilton stock is trading under the ticker symbol HLT, which is the same symbol it traded under before being taken private by Blackstone in 2007.
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Since being acquired by the private-equity giant, Hilton has expanded its room count by more than 34%, focusing most of its growth outside the United States. The company has slowly shifted to a more asset-light model, growing by way of franchise and management contracts rather than investing in real estate.
After the IPO, Blackstone will hold about 750.6 million Hilton shares, or 76.2% of the company. According to the company’s S-1 filing with the U.S. Securities and Exchange Commission, Blackstone and other shareholders cannot sell additional shares for at least 180 days after the IPO, termed a “lock-up” period. After that, selling additional shares is fair game and is expected, as Blackstone will want to prove its internal rate of return.
Hilton could raise an additional $353 million if underwriters sell extra shares to meet demand, increasing the total amount of the IPO to $2.7 billion. That would make it the second-largest U.S. IPO this year, after Plains GP Holdings LP, an affiliate of an oil and gas pipeline company, raised $2.91 billion in October.
Hilton Worldwide Holdings intends to use the net proceeds from the offering and available cash to repay approximately $1.25 billion of term loan borrowings outstanding under its senior secured credit facilities.
As of press time, shares of competing hotel brands were mostly up: Choice Hotels International shares were trading at $46.81, up 0.53%; Hyatt Hotels Corporation shares were at $47.01, up 0.79%; InterContinental Hotels Group shares were at $31.08, up 0.06%; Marriott International shares were at $46.01, down 0.2%; and Starwood Hotels & Resorts Worldwide were at $73.47, up 1.73%, according to the Hotel News Now’s Hotel Stock Index.
HNN's Shawn A. Turner contributed to this report.