March 18 (Bloomberg) -- Morgans Hotel Group Co.’s largest shareholder said it is seeking to overhaul the board, aiming to return the company to profitability or have it pursue strategic alternatives. The stock rose the most in 16 months.
OTK Associates, the owner of 4.5 million Morgans shares, or a 13.9 percent stake, plans to nominate seven directors to the boutique-hotel operator’s board, the investor said in a statement today. The current board has “engaged in a number of self-serving” deals and “questionable employment decisions,” the company said.
“OTK has observed as various management teams and board members squandered resources and failed to capitalize on the extraordinary brand value of the company,” OTK said in a letter to shareholders, included in the statement. “The board has allowed management to pursue a litany of transactions that have destroyed significant equity capital and collectively generated negative returns to stockholders.”
Morgans, based in New York, has reported losses for every quarter since 2007, according to data compiled by Bloomberg. The shares have fallen 56 percent in the past five years, compared with a 2 percent decline in the Bloomberg U.S. Lodging Index.
The stock gained 11 percent today to $5.67, the biggest increase since Oct. 27, 2011.
A telephone message left with Rich Szymanski, chief financial officer of Morgans, wasn’t returned. The company operates properties such as the Mondrian in Los Angeles and the Delano South Beach in Florida.
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