Ashford Inc. ($15.6M market-cap) announced this morning that the board has approved a plan to terminate the registration of the Company's common stock following a reverse stock split transaction, immediately followed by a forward stock split transaction and to delist its shares of common stock from trading on the NYSE American. 

Ashford noted it is taking these steps to avoid the substantial cost and expense of being a public reporting company and to focus the Company's resources on enhancing long-term stockholder value. The Company anticipates savings exceeding $2.5M on an annual basis as a result of the transaction. From the announcement: 

The proposed reverse stock split is a 1-for-10,000 split, in which holders of less than 10,000 shares of the Company's common stock in any one account immediately prior to the reverse stock split would be cashed out at a price of $5.00 per each pre reverse stock split share.

This means that at current share price (~$4.50), purchasing 9999 shares presents an arbitrage opportunity of roughly 11% in a few months. Assuming the transaction closes in July, this gives an IRR of 36.7%. 

Granted that the transaction is subject to a vote, it’s fair to assume that the it is pretty much secured since the CEO Monty J. Bennett owns roughly 65% of the company (assuming full conversion of preferred stock). The company currently expects to cash out 31% of all shareholders for $6M but also expects $7M in transaction expenses. They have the cash, and it seems like they’ll be happy to pay out even if minority shareholding goes over 31%.

This one’s a rather straightforward arbitrage opportunity.

Disclosure: I own shares of AINC