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BMO Capital lowered its price target on Hudson Pacific Properties (NYSE:HPP) to $3.50 from $4.00 on Friday, while maintaining an Outperform rating on the real estate investment trust. The stock, currently trading at $2.65 with a market capitalization of $388 million, has shown strong momentum with a 14% gain over the past week, according to InvestingPro data.
The price target reduction follows Hudson (NYSE:HUD) Pacific’s pricing of a $600 million equity offering anchored by Cohen & Steers, which indicated interest in purchasing up to $300 million of the offering. The offering includes 269.06 million shares, representing approximately 190.1% of the company’s existing share count, with a potential additional $90 million greenshoe option.
The offering price of $2.23 per share represents a 71% discount to the consensus net asset value of $7.79, according to BMO Capital. The research firm estimates the transaction will impact Hudson Pacific’s net asset value per share by approximately 45%. InvestingPro analysis indicates the stock trades at a notably low Price/Book ratio of 0.16, with additional insights available in the comprehensive Pro Research Report covering this and 1,400+ other US equities.
BMO Capital noted that Hudson Pacific has significantly reduced its general and administrative expenses, a move the firm believes "was overdue." The analyst acknowledged that while the transaction is "highly dilutive," it also reduces insolvency risks for the company.
The equity offering proceeds will be used to repay debt, addressing financial concerns that had been weighing on the real estate investment trust’s stock performance.
In other recent news, Hudson Pacific Properties reported its first-quarter 2025 earnings, which revealed an earnings per share (EPS) of -$0.53, missing analyst expectations of -$0.45. The company’s revenue also fell short, coming in at $198.5 million compared to the forecasted $202.31 million. This marks a decrease from $214 million in the same quarter the previous year. Additionally, Hudson Pacific announced a $600 million public offering of common stock and pre-funded warrants, with Cohen & Steers Capital Management expressing interest in purchasing $300 million, although this is not a binding commitment. The company plans to use the proceeds to repay borrowings and for general corporate purposes.
S&P Global Ratings downgraded Hudson Pacific’s credit rating to ’B’ from ’BB-’, citing high leverage and a challenging operating environment. The downgrade extends to the company’s senior unsecured notes and preferred stock. Furthermore, Hudson Pacific expanded its incentive plan, allowing for the issuance of additional shares and extending the grant award period. Ernst & Young LLP was ratified as the company’s independent registered public accounting firm for 2025, although an advisory resolution on executive compensation was not approved. Hudson Pacific is targeting $125-$150 million in non-core asset sales and has secured $475 million in CMBS financing for office properties.
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