Peloton Insiders Dump Half A Billion Dollars In Stock Before Crash

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by Tyler Durden
Wednesday, Jan 19, 2022 - 07:21 PM

Peloton Interactive, Inc's executives and insiders disposed of nearly half a billion dollars worth of stock right before the big crash, according to CNBC

Peloton, which sells at-home exercise equipment like bikes and treadmills, has experienced a collapse in market capitalization by at least 80% in the past year. Shares of the company traded at a 52-week low of 29.13 Tuesday.  

Company executives and insiders unloaded $496 million worth of stock in 2021, right before and during the decline that began in early 1Q21. The stock sales mainly were done above $100 and were part of 10b5-1 plans.

Insider selling began as Peloton became a household name during the pandemic as millions of people canceled their gym memberships and bought a bike or treadmill. Growth prospects looked great during the first year of the pandemic as demand was pulled forward. Executives and insiders knew demand would not last forever as shares traded at rich multiples, even at one point trading at $170 per share in early 2021. 

CNBC explains more about the executives and insider sales. As always, insiders know best... 

John Foley, the company's CEO and co-founder, sold $119 million worth of stock starting in November 2020, according to SmartInsider. Most of his sales were for $110 a share or higher. The sales were part of a prearranged 10b5-1 plan to "sell a limited amount of the company's shares for personal financial management purposes," according to a SEC filing.

Although the plan called for selling up to 2.4 million shares through October 2022, Foley notified the board that he had terminated the selling plan on Aug. 30, 2021, after selling a total of 1 million shares. No reason was given for the termination, but on Nov. 4, 2021, the company slashed its sales forecast and the shares tumbled.

The stock sales represented about 16% of Foley's total stake in the company, excluding options. Including options, the sale equaled about 5% of his holdings, according to SmartInsider.

Many of the top Peloton executives also cashed out a portion of their holdings with well-timed sales. William Lynch, the company president, sold more than $105 million in shares last year, with $72 million sold in February at an average price of $144.95.

Hisao Kushi, co-founder and chief legal and culture officer, sold more than $90 million of his shares — most at prices above $110 a share. Other big sellers included the company's chief product officer, Tom Cortese, who sold more than $60 million of his stock, and its chief operating officer, Mariana Garavaglia, who tallied more than $25 million in sales.

Members of the board have also cashed out their holdings, including Karen Boone, who sold more than $20 million in stock last February at prices above $140 a share, according to filings.

Come to find out. The stock sales were well-timed as the company is preparing to lay off workers and close down stores as the demand outlook worsens. As we noted earlier, the demand story for Peloton was not a forever thing. 

The company has even had the audacity to slap new customers with hundreds of dollars in fees for setup and delivery, something that was always included in the price. 

Insider selling has stopped since shares crashed around the earnings release in November. 

Another unicorn has bit the dust. What could save the stock and possibly engineer a short squeeze is if the company announces plans to enter the metaverse with VR cycling.