(Bloomberg) — Lululemon Athletica Inc. founder Chip Wilson has pledged part of his billion-dollar stake in the yoga clothing maker to secure financing from Goldman Sachs Group Inc., leveraging his largest publicly traded asset.
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An investment firm owned by the Canadian billionaire this month pledged 1.8 million Lululemon shares – nearly 20% of his holdings – as collateral for a $200 million U.S. bank margin loan facility, according to a regulatory filing.
The stake is valued at around $660 million based on Tuesday’s closing price. Lululemon shares have plunged 25% since late March, when the company 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 $6.8 billion, according to the Bloomberg Billionaires Index — did not respond to a request for comment. A spokeswoman for Goldman Sachs declined to comment.
The deal offers a glimpse into how the wealthy can leverage their public holdings for vast sums of cash and comes as Wilson, who stepped away from day-to-day management of Lululemon more than a decade ago, is expanding his investments outside the company .
The 69-year-old increased his stake in Amer Sports Inc. earlier this year through the U.S. initial public offering of the maker of Wilson tennis rackets. He also has a real estate company, 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 tries to cure his rare muscle wasting disease
Pledging of shares is relatively common among the super-rich. Elon Musk has used shares of Tesla Inc. to obtain personal loans, while IWG Plc Chief Executive Mark Dixon has pledged almost all of his shares in the world’s largest serviced office operator as collateral for financing from Deutsche Bank AG.
Borrowing against the value of the shares offers tax advantages compared to selling them, as only realized gains are subject to tax. However, there are risks. Many wealthy investors had to meet margin calls on pledged shares as markets plunged in the early days of the pandemic, and more recent stock swings have created similar problems for executives and founders of U.S. companies.
Read more: Margin calls and lawsuits weigh on the wealth of leveraged executives
Wilson founded Vancouver-based Lululemon in 1998. He stepped down as chairman in 2013 after a manufacturing defect led to see-through yoga pants, and Wilson sparked controversy when he said “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% stake worth nearly $4 billion, his single largest asset, according to Bloomberg’s wealth index.
– With assistance from Andrew Heathcote.
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