Show Time at the Convention Center

IN A YEAR OF DISASTROUS INVESTMENTS, one of the biggest calamities has been Gaylord Entertainment, owner of Nashville's famed Grand Ole Opry as well as the Gaylord Hotels, a leading force in the convention industry.

Investors have checked out in droves, driving the shares down to a low of $5.27 in late November, more than 90% below their all-time high of $59.89, set in August 2007. While hotel stocks in general have suffered amid the downturn, none has fared as badly as Gaylord.

Though the stock (GET) has rebounded to around $9, it still looks way undervalued; Gaylord's businesses are probably worth closer to $50 a share. If management can't do better for shareholders, an acquirer just might.

A variety of forces have conspired against the shares, including a heavy debt load, concerns about liquidity and jitters about the impact of the punk economy on the hotel and convention business, which accounts for 80% of Gaylord's roughly $900 million in revenues.

Consternation has cropped up, too, around the company's adoption in August of a shareholder-rights plan -- a poison-pill provision that effectively limits any investor's stake to 15%. The move was a response to aggressive purchases of Gaylord shares by outsiders as the stock spiraled lower and lower. Dallas-based TRT Holdings, an investment vehicle owned by Texas billionaire Robert Rowling -- the owner of the rival Omni Hotel chain -- scooped up the depressed shares and built a 15% position.

Gaylord has recently rejected TRT Holdings' request to amend the poison pill and let TRT buy up to 30% of the shares and replace three board members with handpicked directors. Gaylord management defends the provision, saying it was designed to protect shareholders' interests.

"It was the right thing to do," says Chief Executive Colin Reed, adding that if TRT wants to take control of Gaylord, it should be direct about its interest and pay a premium for the shares.

Shareholder activists think otherwise. Mario Gabelli, whose Gamco Investors now owns 13.5% of Gaylord, wants the provision rescinded, arguing that poison pills are inherently bad for shareholders and serve only to entrench management.

He says he would like to buy up to 30% at the current price of around $9 a share because he's sure he and his investors will make "three times our money or more." Should a bid be made for Gaylord, his stake would help to ensure shareholders receive the best price, he argues.

FOLKS LIKE GABELLI AREN'T interested in Gaylord for nothing. Despite the short-term stresses, Gaylord has a lot going for it. The Gaylord Hotel franchise is an enviable one, with powerful brand-name recognition among meeting planners, the gatekeepers to the convention industry.