Yahoo Finance Lululemon Billionaire Pledges Shares to Goldman for Margin Loan
(Bloomberg) -- Lululemon Athletica Inc. founder Chip Wilson pledged a chunk of his multibillion-dollar stake in the yogawear maker to secure financing from Goldman Sachs Group Inc., leveraging his biggest listed asset.
Most Read from Bloomberg
NYPD Arrests Over 300 Protesters in Crackdown on College Campuses
The Ozempic Effect: How a Weight Loss Wonder Drug Gobbled Up an Entire Economy
US and Saudis Near Defense Pact Aimed at Reshaping Middle East
An investment firm for the Canadian billionaire pledged 1.8 million Lululemon shares — almost 20% of his holding — this month as collateral for a $200 million margin loan facility from the US bank, according to a regulatory filing.
The stake is valued at about $660 million, based on Tuesday’s closing price. Lululemon stock has slumped 25% since late March, when it reported a slowdown in its US business and gave a disappointing sales outlook.
Representatives for Lululemon and Wilson – who has a net worth of $6.8 billion, according to the Bloomberg Billionaires Index – didn’t respond to a request for comment. A Goldman Sachs spokeswoman declined to comment.
The transaction offers a glimpse at how the rich can leverage their public holdings for huge sums of liquidity and comes as Wilson, who stepped back from day-to-day management of Lululemon more than a decade ago, expands his investments outside the company.
The 69-year-old boosted his stake in Amer Sports Inc. earlier this year through the US initial public offering of the maker for Wilson tennis rackets. He also has a real estate firm, Low Tide Properties, which owns more than two dozen buildings in Vancouver, and is spending $100 million to find a cure for his rare form of muscular dystrophy.
Read More: Lululemon Founder Races to Cure His Rare Muscle-Wasting Disease
Pledging shares is relatively common among the ultra-rich. Elon Musk has used Tesla Inc. stock to obtain personal loans, while IWG Plc Chief Executive Officer Mark Dixon pledged almost all his holding in the world’s biggest operator of serviced offices as collateral for Deutsche Bank AG financing.
Borrowing against the value of shares, as compared to selling them, offers tax advantages since only realized gains are subject to tax. Still, there are risks. Many wealthy investors had to meet margin calls on pledged shares when markets plunged in the early days of the pandemic, and more recent stock swings have created similar issues for US company executives and founders.
Read More: Margin Calls, Lawsuits Squeeze Wealth of Leveraged Executives
Wilson founded Vancouver-based Lululemon in 1998. He exited as chairman in 2013 after a manufacturing defect resulted in transparent yoga pants, and Wilson stirred up controversy by saying “some women’s bodies just don’t work” for the company’s products. He left the board two years later after clashing with the company’s leadership over strategy.
He sold about half his stake in Lululemon a decade ago but still controls a roughly 8% holding worth almost $4 billion, his biggest individual asset, according to Bloomberg’s wealth index.
--With assistance from Andrew Heathcote.
Most Read from Bloomberg Businessweek
AI Is Helping Automate One of the World’s Most Gruesome Jobs
Modi Is $20 Trillion Short on His Grand Plan for India’s Economy
©2024 Bloomberg L.P.
