Lululemon founder offers shares to Goldman for loan
Leverages largest asset as collateral
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.
An investment firm for the Canadian billionaire pledged 1.8 million Lululemon shares — almost 20 per cent of his holding — this month as collateral for a US$200 million margin loan facility from the U.S. bank, according to a regulatory filing.
The stake is valued at about US$660 million, based on Tuesday’s closing price. Lululemon stock has slumped 25 per cent since late March, when it reported a slowdown in its U.S. business and gave a disappointing sales outlook.
Representatives for Lululemon and Wilson — who has a net worth of US$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 U.S. 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 US$100 million to find a cure for his rare form of muscular dystrophy.
Pledging shares is relatively common among the ultrarich. Elon Musk has used Tesla Inc. stock to obtain personal loans, while IWG PLC chief executive 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 U.S. company executives and founders.
Wilson founded Vancouver-based Lululemon in 1998. He exited as chairperson 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 eight per cent holding worth almost US$4 billion, his biggest individual asset, according to Bloomberg’s wealth index.