The WeWork of Hotels – Insider Weekends

  • December 17, 2023

LuxUrban Hotels (LUXH): $4.87

Market Cap: $179.39M

Last summer, during a trip to visit the University of California, Los Angeles, we ended up staying at the Luxe Hotel on Sunset Blvd primarily because of its proximity to campus. The hotel was excellent and when I saw an insider purchase by the CEO of LuxUrban Hotels (LUXH) last week, I was curious to see if they owned the Luxe Hotel considering the similarity in their names. Reviewing the list of “partners” on the company’s website it did not appear to be the case.

LuxUrban Hotels at a Glance
LuxUrban Hotels at a Glance (source: Dec 2023 investor presentation)

I prefer to avoid microcap companies because of the risks and uncertainties associated with them but unfortunately this is the second time this month we are writing about one. The first one was SuRo Capital (SSSS), a company that invests in technology startups, where the CEO was buying shares because the company trades at a nearly 50% discount to NAV.

As we approach the end of the quarter, the number of companies entering their quiet periods, where executives are not allowed to transact in their company stock, has increased, leaving us with very few interesting companies to pick from. This week, I was trying to decide between writing about LuxUrban Hotels and Pulse Biosciences (PLSE), a medical devices company that delivers nanosecond pulses of electrical energy to cells. The fact that Pulse Biosciences is an early-stage pre-revenue company and the insider purchase of LuxUrban Hotels was a flip flopper situation, led me to focus on LuxUrban instead. The stocks of both companies have experienced a lot of strength this year with Pulse up more than 256% and LuxUrban up nearly 194%.

Flip Floppers

Earlier this year we introduced a new custom screen on InsideArbitrage for premium members called Flip Floppers that identifies insiders who purchased and sold shares within a period of time. The screen also identifies insiders that were selling and then suddenly flip to buying instead. The “short-swing profit rule” of the Securities Exchange Act of 1934 states that if an insider of a public company buys and sells, or on the other hand sells and buys, stock of the company within a six-month period, they have to disgorge profits from these “matching” trades to the company.

In the case of LuxUrban, Co-CEO Brian Ferdinand, was buying shares in September 2023 at an average price of $3.34 (not taking into account a preferred share purchase in October) before turning around and selling them just a few weeks later in late November and early December at an average price of $4.70. He then once again flipped and repurchased shares less than two weeks later at $4.56. The footnotes of the latest form 4 filing shows that he is aware of the short-swing rule and the need to give back any profits from matching trades to the company.

Access to Liquidity

So what precipitated this series of flip flopping trades? It looks like they company was in need of capital and the CEO decided in November to provide the company $10 million through a promissory note, which would have required him to sell company stock in increments of $1 million as indicated in this 8-K filing. This changed earlier this month when the company announced that they were in late stage discussions with Wyndham Hotels to onboard 27 hotels to the Wyndham brand. In return Wyndham would provide the company with funds that would help LuxUrban acquire new properties. At this point, Mr. Ferdinand stopped selling shares and instead started buying them.

The company also raised money in October through a 13% Series A cumulative redeemable preferred stock offering, where the underwriter opted to purchase additional 15% series A preferred shares in December.

The Business

We have discussed some of the mechanics and motivations for the insider sales and purchase at LuxUrban without looking into what this company does. LuxUrban operates an asset-light business where it leases properties from hotel owners that have run into trouble. The trouble could be financial or something related to operations where a Hilton or Marriott branded hotel no longer wants to associate with those mega hotel chains. The leases LuxUrban takes on are long-term in nature but have clauses that allow the company to exit the lease within 12 to 24 months if things don’t work out as expected.

Recent results have been encouraging with the company growing rental revenue by 170% in Q3 2023 compared to the same quarter in 2022 and swinging to a profit of $4.93 million compared to a loss of $3.22 million in Q2 2022. Not only did the company increase its number of rooms from 680 at the end of 2022 to 1,446 by the end of Q3 2023, occupancy rates improved to 81% and more importantly revenue per available room (RevPAR), a key hotel metric, increased to $274. The company operates in five markets including New York, Miami Beach, Los Angeles, Washington DC and New Orleans.

The company plans to supercharge growth by growing to between 2,500 and 3,000 rooms by the end of this year and shockingly between 9,000 to 12,000 rooms by 2024. Cash from operations was $5.09 million in Q3 2023. Even if we assume that the company only generates $20 million in funds from operations in 2024, trading at less than Price/FFO of 10, the stock appears cheap. The Wyndham partnership, if it materializes, will be transformative for the company. The big jump in the stock price and the CEO flipping to purchasing shares all start to make sense.

LuxUrban Wyndham Partnership

The Dark Side

It is often more important to understand what could go wrong with an investment instead of focusing on the upside provided by it. When digging into the company some more, I came across this well researched BISNOW article that was shocking. The article compares LuxUrban to WeWork, and not in a good way. As some of you are aware, we decided to short WeWork early in 2022 in anticipating of a potential bankruptcy.

Getting back to that BISNOW article, they listed numerous cases of customers claiming the company was a scam with issues running the gamut from being unable to get a refund for months and hotel buildings not existing on Google Maps. It recounts how Co-CEO Brian Ferdinand had previously been fined by the SEC related to a prior business and that employees of LuxUrban had sued the business for unpaid wages. LuxUrban went public in August 2022 at $4 per share and used to be called CorpHousing Group.

I was curious to see if after shedding the old name, the company had fixed some of the issues the article highlighted. I pulled up the 9 hotels LuxUrban has listed on its website on TripAdvisor. The vast majority of them had a combination of glowing 5 star review punctuated by a series of terrible 1 star reviews, which is a huge red flag. The titles of five reviews in a row for the The Astor by LuxUrban, Trademark Collection by Wyndham in Miami Beach read as follows: Avoid!!!!, HORRIFIC, CAUTION: This place is a total dump!!, etc.

Many of the one star reviews across those nine properties were recent, indicating the issues discussed in the BISNOW article continue to persist. For a company to attempt to scale rapidly before its operational issues are fixed is usually a recipe for disaster. While I started out doing work on LuxUrban thinking it could be a long opportunity, I am now leaning towards this becoming an excellent short opportunity, especially if the stock price continue to go up in anticipating of the Wyndham partnership and hyper growth.

One of the issues I had brought up about the company Cano Health (CANO) in a September 2021 Insider Weekends article, was related to bad patient reviews and I wrote the following:

The stock has rebounded off its lows in mid-August and insiders have been buying actively in the second half of August. An area of concern that came up with researching the company this weekend was their low rating on Yelp from patients and on Indeed from employees. Explosive growth can be difficult to manage and can translate to a less than optimum experience for patients and employees. Growing pains are not unusual and it would be good to see if the company can address these concerns and focus on quality as it continues to grow.

Cano Health went on to lose more than 99% of its value since then.

The key risks to shorting LuxUrban besides low float and potential high borrowing costs is the company finalizing its Wyndham partnership and supercharging growth for a period of time. I am going to add the company to my watchlist for a potential short as the situation plays out in 2024.


Welcome to edition 712 of Insider Weekends. Insider buying increased last week with insiders purchasing $49.51 million of stock compared to $43.91 million in the week prior. Selling declined significantly to $1.72 billion compared to $3.33 billion in the week prior.

Sell/Buy Ratio: The Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio for last week dropped to 34.66. In other words, insiders sold almost 35 times as much stock as they purchased. This week, the Sell/Buy ratio was favorable, compared to the prior week when the ratio stood at 75.88.

Notable Insider Buys:

1. Pulse Biosciences Inc (PLSE): $9.84

Director Robert W. Duggan acquired 299,625 shares of this medical instruments company, paying $9.37 per share for a total amount of $2.81 million. Mr. Duggan increased his stake by 0.82% to 36,984,179 shares with this purchase.

You can view the list of recent insider transactions for Pulse Biosciences Inc here.

P/E: -10.85Forward P/E: N/AIndustry P/E: 32.84
P/S: -60221.4Price/Book: 10.36EV/EBITDA: -13.59
Market Cap: $541.99MAvg. Daily Volume: 373,60952 Week Range: $2.34 – $11.08

2. Terex Corp. (TEX): $58.03

Director David A. Sachs acquired 50,000 shares of this construction equipment company, paying $51.05 per share for a total amount of $2.55 million.

You can view the list of recent insider transactions for Terex Corp. here.

P/E: 8.23Forward P/E: N/AIndustry P/E: 22.86
P/S: 0.76Price/Book: 2.61EV/EBITDA: 6.29
Market Cap: $3.91BAvg. Daily Volume: 704,54352 Week Range: $40.15 – $65.23

3. Ford Motor Co. (F): $12.02

Chief EV, Digital & Design Officer John Douglas Field acquired 182,000 shares of Ford Motor, paying $11.05 per share for a total amount of $2.01 million. Mr. Field increased his stake by 33.82% to 720,176 shares with this purchase.

You can view the list of recent insider transactions for Ford Motor Co. here.

P/E: 7.86Forward P/E: N/AIndustry P/E: 17.88
P/S: 0.27Price/Book: 1.09EV/EBITDA: 10.25
Market Cap: $47.26BAvg. Daily Volume: 51,041,88252 Week Range: $9.53 – $15.02

4. Chipotle Mexican Grill (CMG): $2271.47

Director Gregg L. Engles acquired 877 shares of this restaurant chain, paying $2,284.81 per share for a total amount of $2 million. Mr. Engles increased his stake by 118.67% to 1,616 shares with this purchase. 77 of these shares were purchased indirectly by the spouse of the reporting person.

You can view the list of recent insider transactions for Chipotle Mexican Grill here.

P/E: 53.92Forward P/E: N/AIndustry P/E: 17.88
P/S: 6.54Price/Book: 21.71EV/EBITDA: 35.54
Market Cap: $62.34BAvg. Daily Volume: 181,16652 Week Range: $1344.05 – $2346.35

5. Heartland Express, Inc. (HTLD): $13.71

Chief Executive Officer Michael J. Gerdin acquired 82,509 shares of this trucking company, paying $13.92 per share for a total amount of $1.15 million. These shares were purchased indirectly by trusts.

You can view the list of recent insider transactions for Heartland Express, Inc. here.

P/E: 43.06Forward P/E: N/AIndustry P/E: 22.86
P/S: 0.84Price/Book: 1.26EV/EBITDA: 5.5
Market Cap: $1.08BAvg. Daily Volume: 279,86652 Week Range: $11.41 – $18

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Royal Caribbean Group (RCL): $122.52

Director Arne Alexander Wilhelmsen sold 1,000,000 shares of this cruise company for $120.54, generating $120.54 million from the sale. These shares were sold indirectly by A. WILHELMSEN AS.

You can view the list of recent insider transactions for Royal Caribbean Group here.

P/E: 35.82Forward P/E: N/AIndustry P/E: 17.88
P/S: 2.38Price/Book: 6.83EV/EBITDA: 13.33
Market Cap: $31.39BAvg. Daily Volume: 2,695,56552 Week Range: $47.91 – $123.72

2. Airbnb (ABNB): $146.6

Shares of Airbnb were sold by 5 insiders:

  • CEO and Chairman Brian Chesky sold 271,031 shares for $140.09, generating $37.97 million from the sale.
  • Director Joseph Gebbia sold 166,667 shares for $142.29, generating $23.7 million from the sale. These shares were sold indirectly by a trust.
  • Chief Strategy Officer Nathan Blecharczyk sold 117,818 shares for $140.31, generating $16.53 million from the sale.
  • Chief Accounting Officer David C. Bernstein sold 17,572 shares for $140.00, generating $2.46 million from the sale.
  • Director Jeffrey D. Jordan sold 6,000 shares for $140.00, generating $840,000 from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for Airbnb Inc – Class A here.

P/E: 18.23Forward P/E: N/AIndustry P/E: 17.88
P/S: 9.81Price/Book: 10.4EV/EBITDA: 30.57
Market Cap: $94.17BAvg. Daily Volume: 5,160,65652 Week Range: $81.91 – $154.95

3. Meta Platforms Inc (META): $334.92

Shares of Meta Platforms were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 140,045 shares for $328.78, generating $46.04 million from the sale.
  • Chief Legal Officer Jennifer Newstead sold 566 shares for $324.59, generating $183,718 from the sale.

You can view the list of recent insider transactions for Meta Platforms Inc – Class A here.

P/E: 29.61Forward P/E: N/AIndustry P/E: 17.23
P/S: 7.1Price/Book: 6.03EV/EBITDA: 19.09
Market Cap: $900.93BAvg. Daily Volume: 15,946,59852 Week Range: $112.46 – $342.92

4. Coinbase Global Inc (COIN): $147.9

Shares of this cryptoeconomy focused broker were sold by 5 insiders:

  • Director Frederick Ernest Ehrsam III sold 195,672 shares for $137.38, generating $26.88 million from the sale. These shares were sold indirectly by a trust.
  • Chairman and CEO Brian Armstrong sold 32,228 shares for $142.27, generating $4.59 million from the sale.
  • Director Kathryn Haun sold 8,443 shares for $149.00, generating $1.26 million from the sale. 3,443 of these shares were sold indirectly by Gherardesca LLC.
  • Chief Accounting Officer Jennifer N. Jones sold 1,838 shares for $150.00, generating $275,700 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Financial Officer Alesia J. Haas sold 1,000 shares for $150.00, generating $150,000 from the sale.

You can view the list of recent insider transactions for Coinbase Global Inc – Class A here.

P/E: -46.8Forward P/E: N/AIndustry P/E: 10.74
P/S: 10.2Price/Book: 5.92EV/EBITDA: -53.02
Market Cap: $28.40BAvg. Daily Volume: 12,482,66852 Week Range: $31.55 – $154.74

5. Applovin Corp (APP): $39.95

Shares of this software-based platform for mobile app developers were sold by 3 insiders:

  • Chief Technology Officer Vasily Shikin sold 389,615 shares for $37.13, generating $14.47 million from the sale. These shares were sold indirectly by a trust.
  • Director Eduardo Vivas sold 349,429 shares for $36.72, generating $12.83 million from the sale. These shares were sold indirectly by various trusts.
  • CLO & Corp. Secretary Victoria Valenzuela sold 26,097 shares for $36.98, generating $965,091 from the sale.

You can view the list of recent insider transactions for Applovin Corp – Class A here.

P/E: 140.08Forward P/E: N/AIndustry P/E: 27.70
P/S: 3.49Price/Book: 12.68EV/EBITDA: 15.51
Market Cap: $10.57BAvg. Daily Volume: 2,650,04252 Week Range: $9.14 – $45.11

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer:  I hold a long position in Meta (META). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.