Equity and Equity-Based Compensation

6 Months Ended

Jun. 30, 2022

Equity and Equity-Based CompensationCommon Stock Dividends—The board of directors did not declare a quarterly common stock dividend in 2022 or 2021. Restricted Stock—We incur stock-based compensation expense in connection with restricted stock awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuance.

Performance Stock Units—The compensation committee of the board of directors of the Company may authorize the issuance of performance stock units (“PSUs”), which have a cliff vesting period of three years, to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period.

With respect to the 2020 award agreements, the number of PSUs actually earned may range from 0% to 200% of target based on achievement of specified absolute and relative total stockholder returns based on the formulas determined by the Company’s Compensation Committee on the grant date. The performance criteria for the PSUs are based on market conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

With respect to the 2021 and 2022 award agreements, the criteria for the PSUs are based on performance conditions and market conditions under the relevant literature. The corresponding compensation cost is recognized, based on the grant date fair value of the award, ratably over the service period for the award as the service is rendered, which may vary from period to period, as the number of PSUs earned may vary based on the estimated probable achievement of certain performance targets

(performance conditions). The number of PSUs to be earned based on the applicable performance conditions is determined upon the final vesting date. The initial calculation of PSUs earned can range from 0% to 200% of target, which is further subjected to a specified absolute total stockholder return modifier (market condition) based on the formulas determined by the Company’s compensation committee on the grant date. This will result in an adjustment (75% to 125%) of the initial calculation for the number of PSUs earned based on the applicable performance targets resulting in a final award calculation ranging from 0% to 250% of the target amount.In March 2022, 34,000 PSUs with a fair value of $344,000 and a vesting period of three years were granted. The 2022 awards may be settled in cash or shares of common stock of the Company solely at the option of the Company. During the second quarter, the Company’s stockholders approved an increase to the incentive stock plan, which is sufficient to cover the expected settlements as of June 30, 2022. The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of

Common Stock Resale Agreement—On September 9, 2021, the Company and M3A LP (“M3A”) entered into a purchase agreement (the “M3A Purchase Agreement”) pursuant to which the Company may issue or sell to M3A up to 6.0 million shares of the Company’s common stock from time to time during the term of the M3A Purchase Agreement. Meanwhile, both parties also entered into a registration rights agreement, pursuant to which the Company agreed to file a registration statement with the SEC covering the resale of shares of common stock that are issued to M3A under the M3A Purchase Agreement. The Company originally filed a registration statement on Form S-11 on September 10, 2021, which was declared effective by the SEC on September 29, 2021. In connection with the Company’s recent eligibility to use a Form S-3, the Company filed a registration statement on Form S-3, which was declared effective by the SEC on April 1, 2022, to replace the previous Form S-11 and to register for resale any future resales by M3A under the M3A Purchase Agreement. As of June 30, 2022, the Company had issued 900,000 shares. The Company did not issue any shares during the three and six months ended June 30, 2022 and 2021.

At-the-Market-Equity Distribution Agreement—On April 11, 2022, the Company entered into an equity distribution agreement (the “Virtu Equity Distribution Agreement”) with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of August 3, 2022, the Company has not issued any common stock pursuant to the Virtu Equity Distribution Agreement.

Preferred Dividends—The board of directors declared quarterly dividends per share as presented below:


	Three Months Ended June 30,
	2022		2021

8.45% Series D Cumulative Preferred Stock	$	0.5281	$	—
7.375% Series F Cumulative Preferred Stock	0.4609		—
7.375% Series G Cumulative Preferred Stock	0.4609		—
7.50% Series H Cumulative Preferred Stock	0.4688		—
7.50% Series I Cumulative Preferred Stock	0.4688		—

From December 8, 2020 through December 31, 2021, Ashford Trust entered into privately negotiated exchange agreements with certain holders of its 8.45% Series D Cumulative Preferred Stock, 7.375% Series F Cumulative Preferred Stock, 7.375% Series G Cumulative Preferred Stock, 7.50% Series H Cumulative Preferred Stock and 7.50% Series I Cumulative Preferred Stock in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

The table below summarizes the activity (in thousands):


	Three Months Ended June 30, 2021	Six Months Ended June 30, 2021
		Preferred Shares Tendered	Common Shares Initially Issued	Common Shares Issued (1)	Preferred Shares Tendered	Common Shares Initially Issued	Common Shares Issued (1)
8.45% Series D Cumulative Preferred Stock		363	3,123	312	475	3,910	391
7.375% Series F Cumulative Preferred Stock		567	5,078	508	1,420	10,781	1,078
7.375% Series G Cumulative Preferred Stock		1,262	11,694	1,170	2,513	20,674	2,067
7.50% Series H Cumulative Preferred Stock		544	4,692	469	1,211	9,509	951
7.50% Series I Cumulative Preferred Stock		608	5,222	522	1,999	14,370	1,437
		3,344	29,809	2,981	7,618	59,244	5,924

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(1) Reflects the number of shares issued after the adjustment for the reverse stock split.

Stock Repurchases—On April 6, 2022 the board of directors approved a stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of up to $200 million. The board of directors’ authorization replaced the previous repurchase authorization that the board of directors’ authorized in December 2017. No shares of our common stock or preferred stock were repurchased during the three and six months ended June 30, 2022 and 2021, respectively.