Recent reports have indicated that insiders and executives related to Peloton, sold the equivalent of about $500 million in shares. The company is currently under close watch by Securities & Exchange Commision (SEC) as the sales occurred promptly before a sharp decline in stock price. As of Tuesday, Peloton sits at $29.11 per share; a 52-week low for the company. The low was the result of an 80% drop in price following a 52-week high of $155.52 per share. All of the sales were reported and conducted through 10b5-1 plans, which are pre-scheduled selling plans. Many are wondering what led investors and executives to cash out before such a significant impact on price.
As COVID restrictions reached their peak, gyms and fitness centers across the globe were shut down for weeks and months on end. During this time (Late 2020-Early 2021), Peloton saw product sales soar through predictions. Additionally, subscriber count for the company rose sharply as many found themselves relying on their bikes and equipment to meet workout expectations. During this time, the stock price for Peloton started to increase greatly going from $80 per share to over $100 per share in just a matter of months. Along with the increase in price, is when we start to see the sale of a lot of stock. In November 2020, John Folely, CEO and co-founder of Peloton, sold $119 million worth of his stock. According to the documented 10b5-1 plan, the sale was for “personal financial management reasons”. Karen Boone, a member of Peloton’s board, cashed out $20 million last February. William Lynch, company president, sold over $72 million in stock during the same month. With so much of Peloton’s share being dumped, the question becomes was the share price drop a result of stock sales, or were stock sales a result of forecasted share price decreases?