Hilton Worldwide is hoping to profit from a recovering economy and from a U.S. stock market ripe for an initial public offering, as a filing on Monday reveals the company increased the amount it expects to raise from $1.25 billion to $2.4 billion.
That would make it the largest IPO for a hotel company. The Blackstone Group investment bank took Hilton private in 2007 for $18 billion. Blackstone is not selling any of its stock as part of the IPO, and would own approximately 76 percent of the hotel titan after the public offering on the New York Stock Exchange, according to the filing with the Securities and Exchange Commission.
Prices on the stock market have soared to record highs in recent weeks, making it a good time for companies to go public while investors are optimistic, says Max Wolff, chief economist at ZT Wealth private equity firm.
"The IPO window was subject to sudden and painful closings in the past few years because of a general underperformance of equities," Wolff explains.
During the past decade investors were also skeptical about initial public offerings following the bust of the tech stock bubble in 2000, when numerous Internet companies went public with valuations that far exceeded their earnings potential, Wolff says. Hilton's decision to stage an IPO is a sign of stock market prosperity, but its decision to nearly double its stock sale goal is a bet that the economy will continue to improve, Wolff explains.
"Room occupancy rates have been rising, and that is often closely tied with the job market as people have more money to spend on travel," Wolff says.
The majority of Hilton's properties are located in the U.S., but taking the company public also reflects optimism in global real estate and economic growth, as its properties abroad might increase in value and attract travelers benefiting from improving job markets in those countries, Wolff predicts.