billionaire Masimo Founder Joe Chiani is best known for his successful legal battles. apple He borrowed half of his $660 million stake in a health technology company rather than sell it because of his friendship with President Joe Biden, according to the company. Corporate declaration Since the beginning of this week.
It would be unusual for a management team to borrow such a large amount of stock, but it could be useful as it prepares for a fight with activists seeking to take control of the board. The move will allow Mr. Chiani, the company’s CEO and chairman, to retain his shares and voting rights while also accessing the funds he says he needs for family reasons.
Many of its medical technology peers prohibit such moves, which could leave Chiani vulnerable to margin calls if Masimo’s stock price falls below certain thresholds. Kiani owns just under 4 million Masimo shares, or about 7.5% of the company, according to FactSet data.
Masimo, which makes wearable devices and health monitoring products, is preparing to fend off a second proxy fight from Quentin Coffey’s Politan Capital Management. Kiani described Coffey as “disruptive” in a CNBC interview in March.
Masimo shares have risen 15% since the beginning of the year, giving the company a market capitalization of more than $7 billion. The stock price has been volatile in the second half of 2023, falling 47% in the third quarter, but rising 34% in the fourth quarter.
Politan controls 8.9% of Masimo’s shares. This is larger than Kiani’s stake, but even before the pledged shares are valued. Regulatory notification The CEO has the option to increase his shareholding to 9.2% if exercised, it said.
Politan has already won two seats on Mr. Massimo’s six-member board in a controversial 2023 proxy fight, and last month won two more seats, including Mr. Chiani, to strengthen its control. announced that it aims to acquire the
Kiani, 59, pledged 2.97 million Masimo shares worth $397 million as collateral for a “personal loan” as of April. The company said in its annual report that Mr. Kiani had “financial planning objectives” for his family that required him to sell his shares, but that he had “no intention to reduce his shareholding.” I didn’t want that,” he said. His purpose was not detailed in the filing.
“The pledge of shares was pre-approved by the board of directors and reflects Mr. Chiani’s belief in the value of Masimo shares, despite the short-term share price decline in the second half of 2023,” a Masimo spokesperson said. said in an emailed statement. . “Rather than selling the promised shares, Mr. Kiani increased his commitment to maintain his share ownership.”
The spokesperson added that Chiani purchased approximately $7 million worth of Masimo shares in the second half of 2022 and the first half of 2023.
The Masimo logo will be displayed at Masimo’s headquarters in Irvine, California on December 27, 2023.
Tama Mario | Getty Images
Mr. Kiani is a major donor to the Democratic Party and is reportedly close to the president. He also owns an 8,000-acre winery in Santa Ynez, California, near Santa Barbara. His loan amount was up from the previous year, when Kiani pledged only 400,000 shares as collateral.
Masimo’s board of directors also includes Bob Chapek. I participated In January, almost exactly a year after he was fired, disney’s CEO.
Some of Masimo’s colleagues include: Agilent, striker and medtronic, do not allow executives to pledge their shares. Companies generally frown upon stock pledging, but some, such as Masimo, allow it with board approval. Stock-backed loans, or “lombard loans,” typically require the borrower to sell the stock if the value falls below a certain point, which can cause the stock price to fall further if you’re a major shareholder.
Mr. Masimo’s previous proxy fight resulted in litigation between the two sides, resulting in Politan winning $18 million in legal fees after it abandoned its efforts to block the investment company. There were also personal attacks.in Regulatory notificationthe company described Coffey as a person with “arrogance” “no different than his more prominent colleague Bill Ackman.”
Major shareholder, including vanguardsided with activist investors who argued that Masimo was undermined by poor governance practices and its acquisition of consumer audio company Sound United.Masimo’s stock price plummeted 37% on the day the trade took place. announced In February 2022.
Masimo announced last month that it would spin off its consumer business, boosting its stock price. When Politan announced a second campaign a few days later, the stock price rose further. Politan said news of the spinoff was announced after the bell on Friday, just before the activists announced a second campaign, but that the company “rushed” to learn of those plans.
Mr. Massimo denied the allegations. The company has not yet filed a proxy statement and has not scheduled an annual meeting.
Masimo has had some success in recent months. The company filed a high-profile patent lawsuit against Apple, alleging that the company infringed on its pulse oximeter technology for the Apple Watch. After some initial setbacks, Masimo won a judgment restricting the sale of some of its watches. The two companies continue to negotiate on this matter.