DALLAS, Feb. 28, 2022 /PRNewswire/ -- Ashford Inc.
(NYSE American: AINC) announced that it successfully settled a
lawsuit on behalf of its managed platform, Ashford Hospitality
Trust, Inc. (NYSE: AHT) ("Ashford Trust") against Cygnus Capital,
Inc. (together with its affiliates, "Cygnus"), represented by
Olshan Frome Wolosky LLP ("Olshan"), as well as certain other
defendants including ThornTree Capital and an individual
stockholder – Cygnus Chief Executive Officer's mother-in-law,
Rebecca Harvey, on highly favorable
terms including obligations for the defendants to make a payment
exceeding one million dollars to
Ashford Trust and to transfer 150,000 shares of Ashford Trust stock
to a charitable trust created by Ashford Trust. The lawsuit
settlement agreement contained a confidentiality clause with
respect to certain terms, which recently expired.
Through its Complaint, Ashford Trust asserted that Cygnus
engaged in material violations of federal securities laws by
failing to disclose the formation of an undisclosed stockholder
group which acquired, in aggregate, over 20% of Ashford Trust
shares, well in excess of the 9.8% ownership limit contained in
Ashford Trust's charter. The Complaint also alleged that the
defendants formed a group pursuant to Section 13(d) of the
Securities Exchange Act of 1934 that acted like a "wolf pack,"
coordinating purchases and acting in concert without disclosing
their activities as required by law. The three parties, whose
principals have all known each other for decades, would have the
public believe that their almost simultaneous purchase of shares
was just a coincidence. It was not explained how Olshan
missed these obvious infractions while conducting their due
diligence before deciding to pursue a proxy contest on behalf of
Cygnus.
In Ashford's experience, Olshan has had a history of poorly
advising their naïve, first-time-activist clients. The ill-advised
proxy contest launched by Cygnus quickly unraveled based on
developments in the lawsuit filed by Ashford Trust. First, on
February 15, 2021, Ashford Trust
filed a pleading entitled, "Notice of Evidence of Potential
Inaccuracy in Sworn Declaration from Rebecca Harvey," in which Ashford Trust notified
the Court of discrepancies between the sworn testimony of Ms.
Harvey and records that were flatly inconsistent with the story
told by Ms. Harvey under oath. Then, on February 18, 2021, the Court ordered Cygnus to
produce records of electronic communications among the defendants
relating to their alleged violations of the securities laws.
Shortly after the Court's Order, rather than turn over e-mails and
text messages that would have further revealed the truth about
defendants' actions, Cygnus withdrew its proxy contest and took
immediate steps to quickly and quietly settle the lawsuit. On
February 22, 2021, Cygnus withdrew
its nominations of all of its director candidates for election at
Ashford Trust's 2021 Annual Meeting of Stockholders. The
withdrawal of four nominations followed the prior withdrawal of
other nominees. Such serial withdrawals of nominees in a
proxy contest are rare and, in Ashford Inc.'s view, reflect the
actions of an inexperienced, clumsy activist with insufficient and
poor guidance from counsel.
"We are pleased that we settled this case on such favorable
terms for our shareholders and the charitable trust," said
Monty J. Bennett, Ashford Inc.'s CEO
and Chairman, "Now that their wrongful attempt at taking over
Ashford Trust has ended, we will continue to focus our time and
energy on maximizing value to shareholders and navigating the
ongoing pandemic." He continued, "The efforts of these
unaccomplished hedge funds, such as Cygnus, have resulted in
nothing beyond costing their investors and targets' shareholders
substantial legal and other unnecessary costs. I strongly
suggest that anyone considering engaging with Cygnus or their
counsel, Olshan, rethink such engagement. Their involvement
with any public platform, in my opinion, will bring nothing but
decreased shareholder value. We are thankful we were able to
return our focus to rebuilding the lives of our employees, our
families, and our company."
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SOURCE Ashford Inc.