By Melissa Koenig For Dailymail.Com
Published: 11:58 EDT, 11 October 2022 | Updated: 13:45 EDT, 11 October 2022
Ex-Peloton CEO John Foley had pledged at least 3.5 million shares of the company — worth an estimated $300 million — for personal loans from Goldman Sachs when he was an executive in the company, it's been revealed.
But by September, Foley, 51, had faced repeated calls to put up fresh funds or additional collateral for the loans, as the shares' value dropped 10 percent to just $30million, the Wall Street Journal reported Tuesday.
He has since stepped down from his position on the board of the company he founded a decade ago, providing him with flexibility to sell or pledge more Peloton shares to the banking giant — though Foley insists that is not the reason he left.
Foley was instead able to secure private financing to avoid stock sales by Goldman after he listed his East Hampton oceanfront mansion for sale and sold his Manhattan penthouse.
'I didn't resign from the board because I was underwater,' he told the Journal. '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.'
Ex-Peloton CEO John Foley, 51, had pledged 3.5 million shares of the company for personal loans from Goldman Sachs
The banking giant soon pushed him to put up additional funds or collateral as the shares' value plummeted
In recent months, though, the once-popular stationary bike company has been plagued by plummeting sales, with six straight quarters of losses in a row.
Executives have had to lay off hundreds of employees, as they desperately try to expand the Peloton market by selling them in more than 100 Dick's Sporting Goods stores and on Amazon, where they are currently on sale.
If that doesn't work, executives fear they they might have to merge with other companies — or even get bought out.
Those shares have been greatly devalued, with shares trading at just $9 Tuesday morning
Foley had stepped down from the company in September, after the exercise business he created reported a $1.2 billion quarterly loss and a nearly 30 percent drop in revenue.
He said at the time that he was proud of the company he launched in 2012, with the first studio in Manhattan, where instructors would lead classes that were also beamed into members' homes.
But, he said, he was ready to embark on a 'new professional chapter.'
By stepping down from the company, though, Foley was able to sell or pledge more Peloton shares to Goldman Sachs, according to the Wall Street Journal.
Like many publicly-traded, Peloton prevents its directors and executives from selling their shares during certain trading periods.
And the company also has a policy that limits pledges directors or executives from leveraging margin loans to 40 percent of the value of an individual's share or vested options.
In fact, just weeks after stepping down as CEO in February, Foley reported selling $50 million worth of Peloton shares.
A Peloton spokesman told CNBC that the stock sale by Foley was 'based on his own financial planning.'
The sale left him and his wife, Jill, another former Peloton executive with 6.6 million shares, and options on another 8.4 million.
Those shares, though, are now worth less than $100 million as Peloton was trading Tuesday morning at just $9.
That is down nearly 90 percent over the past year, and down 95 percent from the company's peak in December 2020, when the world was gripped by pandemic shut-downs.
Foley had stepped down from the company in September, after the exercise business he created reported a $1.2 billion quarterly loss and a nearly 30 percent drop in revenue. He is pictured here speaking during the TechCrunch Disrupt SF conference in 2018
Foley and his wife Jill are reportedly quietly seeking a private buyer for their sprawling East Hamptons compound for less than they bought it
They purchased the home, on a spacious four-acre oceanfront lot, in December for $55 million, which was $2.5 million above the asking price
Foley's Manhattan penthouse apartment (pictured) is also under contract
Goldman Sachs had long backed the company, serving as the lead underwriter of Peloton's initial public offering in 2019.
It also co-led a $1 billion stock offering in November 2021 as Foley soared high during Peloton's pandemic sales surge.
He was featured in a flattering New York Times profile in late 2020, which depicted him lugging firewood to his West Village townhouse, where he kept a Peloton treadmill in his basement bathroom.
And he and his wife were able to buy an East Hampton oceanfront mansion last December for $55 million, which was $2.5 million above the asking price.
The 6,100-square-foot mansion, designed by Francis Fleetwood, has five bedrooms, a chef's kitchen, and multiple sundecks.
But the praise soon turned to criticism over a number of PR mishaps and Peloton's falling share prices.
In December, Foley came under fire for hosting an invite-only party for top instructors at New York's iconic Plaza Hotel despite cancelling the firm's company-wide festive bash.
The boss held a swanky party at the famous five star hotel, near Central Park, on December 8, with pictures of the glitzy bash being shared to social media by glamorous Peloton instructors who were among invited VIPs.
The Peloton co-founder claimed the party was a 'personal' event hosted by himself for his 'vaccinated family and friends' and was not affiliated with Peloton, according to a company-wide email seen by The New York Post.
But that excuse cut little ice with the vast majority of the firm's workers, who had their own work party canceled due to the Omicron COVID surge and the firm's tanking share price.
And while Peloton stock soared during the pandemic as home fitness boomed, it has since crashed, with the company facing criticism that it overinvested in expansion plans during a growth spurt that was unsustainable.
Making matters worse, the company faced scandals about its safety after a child died and their treadmills had to be recalled, as well as bad publicity from a much-mocked Christmas advertisement, and Sex and the City's male lead Mr. Big dying from a heart attack following a Peloton class
In the aftermath, Foley listed his newly bought East Hampton home in March for less than he purchased it, and has even listed his six-bedroom Manhattan penthouse for sale.
It is currently under contract for $6.5million, according to the Wall Street Journal.
Foley may now even sell his remaining 60 percent stake in the company following a cooling-off period, an unnamed source previously told Yahoo Finance.
In December, Foley came under fire for hosting an invite-only party for top instructors at New York's iconic Plaza Hotel despite cancelling the firm's company-wide festive bash
Pictures and videos showed attendees (pictured: Aditi Shah and Kendall Toole) dancing the night away in a room grandly decorated with a disco ball
Foley had also drawn the ire of activist investor Blackwells Capital as the company struggled to maintain the breakneck growth that propelled its valuation to $52 billion in early 2021.
The investment firm called for his removal and even urged the company to sell itself, blaming the stock's underperformance to 'gross mismanagement,' Foley's poor decision making and a lack of credibility.
Jason Aintabi, Blackwells' chief investment officer, accused Foley of 'repeated failures' including hiring his wife as vice president of apparel.
In February, Foley did resign as CEO as Peloton announced a dramatic reorganization and cost-cutting plan, along with 2,800 layoffs in a bid to shore up expenses.
Executives are now working hard to keep the company solvent, with Foley's successor, CEO Barry McCarthy ominously telling employees they have six months to save the company after he laid off another 500 employees.
He said in an internal memo to employees, obtained by the Wall Street Journal: 'I know many of you will feel angry, frustrated, and emotionally drained by today's news, but please know this is a necessary step if we are going to save Peloton, and we are.'
McCarthy also told the Journal: 'There comes a point in time when we've either been successful or we have not.
'We need to grow the business to a sustainable level,' he said.
Speculation soon mounted that McCarthy was considering merging with other companies or even being bought by a larger company.
It remains unclear what would happen to its bikes, treadmills and other equipment if that were to happen.
CEO Barry McCarthy announced 500 layoffs earlier this month, but still expressed optimism about the future of the company following its deals with Amazon and Hilton
Still, McCarthy seemed optimistic about the future of the company.
The CEO told the Wall Street Journal that they had significantly cut losses through its massive layoffs and the outsourcing of manufacturing.
Peloton also reportedly ended June with $1.25 billion in cash reserves and a $500 million credit line.
One of the next tasks for McCarthy is finding a chief marketing officer after the departure of Dara Treseder, the former global head of marketing.
She is one of the key figures in the deal to put Peloton's inside Dick's Sporting Goods stores, as well as in the August announcement that it would start selling its products on Amazon.
Company executives also announced recently that they would be installing Peloton bikes in Hilton hotels around the country in a major push to create buzz and sell more products.
Betsy Webb, global vice president of Peloton's commercial branch, said she first used a Peloton while staying at a hotel and that she was 'immediately hooked.'
'We recognize the importance for our members to maintain their wellness routines while on the road, with data showing over 1.6 million Peloton rides completed globally on Peloton Bikes in hotels in the past year,' Webb said.
'So, we are thrilled to be working with Hilton, allowing us to meet the needs of our current members, while also enabling potential new members to experience Peloton for the first time.'
These recent moves by Peloton hope to revitalize growth within the company.
March 2021: Peloton warns parents to keep children away from its Tread+ treadmills after a six year old child is killed after being pulled underneath one of them
May 2021: Peloton recalls the running machines after reports of at least 72 other injuries emerge. Class action lawsuits against the company are filed
June 2021: Firm is accused of greed after disabling 'Just Run' feature on Tread+ which lets users run for free, instead forcing them to pay a $39 fee. Brought the free option back after an outcry
August 2021: Peloton slashes cost of its entry-level bike by $400 as revenue growth slows
November 2021: Peloton reports sales of its products fell by 17 percent for the most recent quarter, with the smallest gain in subscribers since going public in September 2019. That saw Peloton's market cap tumble by $8 billion, and John Foley lose his billionaire status
December 2021: Mr Big - played by Chris Noth - dies of a heart attack after using a Peloton in the Sex and the City reboot And Just Like That. Shares continue to drop. Days later, Peloton is hailed for producing an advert featuring the revived character joking about the exercise bike. But it is forced to pull the hailed commercial after Noth is hit by multiple claims of sexual assault, which he denies
Firm hit by fresh scandal after John Foley hosts lavish Christmas party for select employees, after annual bash was scrapped for rank-and-file staff
Chris Noth, who plays Mr Big in Sex and the City, dies from a heart attack after using his Peloton
January 2022: Leaked audio reveals plans to fire 41% of sales and marketing teams. Stock price tumbles further after it emerged production of bikes and treadmills would be slowed due to sinking demand.
Calls for Foley to be fired emerge.
The PR gets even worse as another TV character is almost killed off from a heart attack after a Peloton session. Showtime's popular series Billions used the bikes to give Mike Wagner, played by David Costabile, a scare in the season six premiere. He survives, and declared he is not going to die 'like Mr Big'
Mike Wagner, played by David Costabile, is seen in the Season 6 premiere of Showtime’s Billions having a heart attack after riding a Peloton bike
February 2022: Executives at Peloton alleged to have hatched a plan to conceal rust and corrosion on their high-end bikes with a chemical solution.
When staff noticed that paint was flaking off some of the machines last year the company allegedly began using a chemical solution that disguised corrosion on the bikes by 'reacting with the rust to form a black layer', according to the Financial Times.
May 2022: Peloton's stocks plummet nearly 90 percent over the past year, as company executives revealed that it lost a staggering $750 million in the previous quarter due to unsold inventory and mounting costs.
The company lost $757.1 million for the three months of 2022, amounting to about $2.27 per share. And when stripping out nonrecurring items from the equation, a survey by Zacks Investment Research, it lost 98 cents per share - outpacing projections of a per-share loss of 85 cents.
August 2022: Company announces it is slashing 784 jobs, increasing equipment prices, closing retail locations, and requiring employees to return to the office by November, as they try to secure their bottom line.
Peloton reports a huge $1.2 billion loss, its sixth consecutive quarter of reported losses, sending shares tumbling 15 percent.
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