Peloton co-founder John Foley faced Goldman Sachs margin calls as stock sank: WSJ
Foley stepped down from Peloton's board in September
Peloton Interactive co-founder and former CEO John Foley was hit with multiple margin calls from Goldman Sachs as shares of the exercise equipment and media company plunged, according to The Wall Street Journal.
Foley had borrowed money against his company stock prior to leaving the board and Goldman wanted additional capital or collateral to offset the declining value of Foley's falling Peloton shares.
The Journal reported that Foley pledged roughly 20% of his stake as collateral, totaling about 3.5 million shares, as of the end of September 2021. At the time the stock was worth more than $300 million.Those same shares are worth $30 million at current prices.
Peloton directors or executives can pledge no more than 40% of their shares or vested options toward margin loans, according to company policy.
Peloton Interactive
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PTON | PELOTON INTERACTIVE INC. | 9.55 | -0.79 | -7.64% |
| GS | THE GOLDMAN SACHS GROUP INC. | 601.71 | -3.86 | -0.64% |
Goldman's repeated requests came as Peloton's shares tumbled. The stock has fallen approximately 90% in the past year. Representatives for Peloton and Goldman Sachs did not immediately return FOX Business for comment.
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While resigning from Peloton's board of directors in September gave Foley flexibility to sell or pledge additional Peloton shares, he told the Journal the margin calls did not prompt his departure.
"I didn’t resign from the board because I was underwater," he explained. "To the extent that I took on debt through Goldman, it was because I am bullish on Peloton and still am. It was and is a great company."
Peloton co-founder John Foley stepped down from the fitness giant's board of directors in September. (Michael Nagle/Bloomberg via Getty Images / Getty Images)
Though Foley was reportedly able to secure private financing and avoid stock sales by Goldman, he declined to say how much of his current stake is pledged or borrowed against his holdings. His company shares are currently worth less than $100 million, according to the Journal.
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In February, former Spotify and Netflix executive Barry McCarthy took over the chief executive officer reins from Foley. Following McCarthy's appointment, Peloton embarked on an $800 million restructuring program designed to help the company reach break-even cash flow by the end of fiscal year 2023.
Peloton's shares have tumbled approximately 90% in the past year. (Photo courtesy of Peloton)
Since the restructuring announcement, Peloton has engaged in several rounds of employee layoffs. The fitness company also said it would raise prices on its Bike and Tread+ products, significantly reduce its North American retail footprint and eliminate its final mile distribution network.
Additionally, the company has secured $750 million in financing, maintained a liquid cash balance of more than $1 million, outsourced its Peloton Bike and Tread production in Taiwan, expanded its product portfolio with a $3,195 rowing machine and forged partnerships with Hilton, Dick's Sporting Goods and Amazon.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| HLT | HILTON WORLDWIDE HOLDINGS INC. | 253.44 | +3.02 | +1.21% |
| DKS | DICK'S SPORTING GOODS INC. | 215.24 | +8.00 | +3.86% |
| AMZN | AMAZON.COM INC. | 207.89 | +2.15 | +1.05% |
Following its latest round of layoffs last week, McCarthy told staff in a memo that the bulk of the company's restructuring work is complete.
"We are in the business of driving performance, and the business is indeed performing," McCarthy said in a separate news release. "By any measure, we have made remarkable progress in record time."