Taking La Quinta

A recent story on the company La Quinta and Jim Cramer should be a cautionary tale for all hopeful investors.
La Quinta Holdings is the select-service hotel chain with about 870 locations. Jim Cramer, of the popular investment show "Mad Money," has recommended the stock multiple times, largely because of the positive commentary from the company's long-time CEO, Wayne Goldberg-- particularly as a guest on Cramer's shows. It was as if Cramer felt he had something of a personal relationship with Goldberg and his statements had more weight.

Until last Thursday.

First, the CEO announced he was stepping down effective immediately. La Quinta did not cite a real reason for the exit; Goldberg simply said he had fulfilled his goals and it was a good time to look for new opportunities.

"But if that was the whole story, why not give investors a heads up and announce he's retiring in a few months?" Cramer asked.

This move was especially disturbing to Cramer, as Goldberg had been the president and CEO of La Quinta since 2006. He took the company public in 2014, and then suddenly resigns with no warning, pretty much overnight?

The second blow came when La Quinta cut its full-year financial guidance for the second time in two months. It had a vicious downward revision of its revenue per available room, guiding to a range of 3.5 to 4.5 percent from 6 to 7 percent.

On top of that, the company cut its earnings before interest, taxes, depreciation and amortization forecast to a range of $393 million to $400 million, down from $398 million to $404 million. It blamed weaker-than-anticipated hotel demand during August and September.

The very next day, La Quinta dropped 15 percent, down to its April 2014 IPO price of $17.

Investments are significant ventures often made with people who are completely insincere.