- Long-stay hotel chain Extended Stay America rises 16% as company goes public.
- Company is headed by ex-Starbucks CEO Jim Donald
- Average stay of guest is 26 days
The hotel chain, which specializes in mid-priced hotel rooms that mimic apartments and are rented by the week or month, priced its IPO at $20 per share, near the top of the range of $18 to $21. The shares rallied as high as $23.90 in early trading and were up $3.20 to $23.20 at midday.
The company, which is headed by ex-Starbucks CEO Jim Donald, raised roughly $565 million with the sale of 28.25 million shares.
IPOs have been hot lately, witnessed by the 70%-plus first-day return of micro-blogging site Twitter last week.
The hotel chain, which operates about 700 hotels, was bought out of bankruptcy three years ago by investment firms Blackstone Group, Centerbridge Partners and Paulson & Co. Extended Stay sold about 14% of the company, giving the company a market value of roughly $4 billion.
Guests stay an average 26 days at the hotel. And the average nightly rate for extended-stay hotels was $54.77 last year, compared to $119.88 for upper-level long-stay companies, according to Bloomberg News, citing data from STR Analytics.
In an interview with cable business channel CNBC this morning, CEO Donald said the proceeds of the IPO will be used to pay off debt and that no new hotels were currently in the pipeline. He wouldn't rule out a moderate room price increase in the future.
He said the company's $626 million renovation program, which he dubbed the "Platinum Renovation" would be 50% complete by the end of the first quarter of 2014.
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