Peloton co-founder John Foley faced frequent margin calls from Goldman Sachs as stocks tumble

John Foley, co-founder and former CEO of

Interactive Peloton a company ,

PTON -3.41%

He encountered frequent margin calls on the money he borrowed against Peloton properties before him The board of directors of the fitness company left last month, according to people familiar with the situation.

Peloton shares have also fallen over the past year,

Goldman Sachs Group a company

p -2.11%

Mr. Foley was asked several times to provide new money or additional collateral for the personal loans the bank had given him, People said. The company’s share price decreased nearly 95% From a peak of $160 in December 2020.

The resignation from the board gave Foley the flexibility to sell or pledge more Peloton shares, although he said margin calls were not the reason he left the company.

“I did not resign from the board of directors because I was underwater,” he said. “To the extent I got into debt through Goldman, it was because I am an optimist with Peloton and I still am. It has been and continues to be a great company.”

The former president and CEO pledged as security about 3.5 million shares of Peloton stock through the end of September 2021, or about 20% of his stake at that time, stock filings show. The mortgaged stock was worth more than $300 million a year ago. At current prices, it’s worth about $30 million.

Peloton has cut thousands of jobs this year to limit its losses.


John Smith / View Press / Getty Images

People said Mr. Foley was able to secure private financing and avoid stock sales by Goldman. He declined to disclose on Monday how much he pledged his current share or how much he borrowed against his holdings.

His seat on the board has limited his ability to raise additional funds because most public companies prohibit directors and executives from selling their shares during certain trading periods. In addition, Peloton’s policy limits covenants for margin loans by directors or executives to 40% of the value of an individual’s stock or options acquired.

This was followed by Mr. Foley’s decision to leave the board of directors on September 12 Several tumultuous months in the company He co-founded it a decade ago, as well as a sharp decline in his personal fortune Peloton’s flabby fortunes Underestimate the value of his holdings. His stake in the company was $1.5 billion a year ago, and it currently stands at less than $100 million.

“Everyone can see that I’ve had a difficult year,” said Mr. Foley. “This wasn’t a fun personal budget reset.”

Barry McCarthy, a Silicon Valley veteran, became Peloton’s CEO in February.


Angela Owens/The Wall Street Journal

In February, Mr. Foley He stepped down as CEO of Peloton He was succeeded by former Barry McCarthy

Netflix a company

and Spotify Technology SA Executive. Mr. Foley retained his position as CEO of Peloton and continued to own a controlling stake in the company through Class B shares with 20 votes each.

A few weeks later, Mr. Foley reported selling it $50 million in Peloton stock in a special treatment. At the time, Peloton said the sale was part of the CEO’s personal financial planning. The sale left him and his wife, former Peloton CEO Jill Foley, 6.6 million shares and options on another 8.4 million, according to stock filings, which are currently worth less than $100 million. He has not reported any stock or option sales since March. Business Insider reported in March that Mr. Foley He was in discussions with Goldman About restructuring his personal loans.

Peloton’s business declined throughout the spring and summer, with the company in August Reporting a loss of $1.2 billion And the first-ever quarter in which subscriber numbers failed to grow. The company has cut thousands of jobs this year to limit its losses, including A round of layoffs was revealed last week.

Mr. Foley’s 10-year tenure as CEO was marked by rapid growth and sometimes generous spending. He came under fire from Peloton employees last December for hosting a black-tie holiday party that included some of the company’s celebrity coaches after weeks of a hiring freeze. Instagram photos of coaches in gowns dancing at the luxury Plaza Hotel in New York have gone viral. Mr Foley admitted on social media that the event had caused “frustration and anxiety” among staff.

Peloton has been on an uphill journey, announcing that its CEO will be stepping down and thousands of jobs will be cut, despite soaring sales early in the pandemic. Here’s why the Peloton has gone viral, and why it’s in circulation right now. Image caption: Jacob Reynolds

That same month, Mr. Foley paid $55 million to purchase an oceanfront mansion in East Hampton, New York, according to real estate records and people familiar with the deal. In September he and Mrs. Foley put a penthouse in Manhattan up for sale. The property, which last had a price of $6.5 million, is up for sale, according to listings site StreetEasy.

Margin loans, or borrow against portfolios of stocks and bonds, Come with risk The broker can ask for additional cash or collateral to meet the required minimum equity if the price of the security falls too low. Sharp declines in stock prices during the dot-com explosion 2000 and The 2008 financial crisis generated margin calls For executives of well-known companies.

John Foley paid $55 million for this oceanfront mansion in East Hampton, New York


Image Scale

Peloton requires directors, executives, and employees to obtain approval to pledge their shares as security for margin loans. Other Peloton executives have also pledged some of their Class B properties, and in Peloton’s annual report last month, the company warned that investors could be hurt if its stock falls and executives are forced to sell shares.

Goldman worked closely with Peloton, including when Mr. Foley was CEO. The investment bank was one of the main guarantors of the company’s initial public offering in 2019. Goldman’s bankers also co-led a $1 billion share offering in November 2021.

Investors I was nervous at first on Peloton—Its shares fell 11% on the day it debuted at $29. Stock jumped in 2020 During the onset of the Covid-19 pandemic, giving the company a peak market capitalization of $50 billion and making Mr. Foley a billionaire on paper. Shares closed 3.4% lower Tuesday at $8.78.

Catherine Clark contributed to this article.

write to Sharon Terlep at [email protected] and Suzanne Franica at [email protected]

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