Peloton insiders bought almost $500 million in inventory earlier than its massive drop

peloton Executives and insiders sold nearly $500 million worth of their stock ahead of the big drop, according to filings with the Securities and Exchange Commission.

Peloton stock is down more than 80% from its highs over the last year, hitting a 52-week low of $29.11 on Tuesday. But the company’s CEO and other executives sold millions of shares at prices in excess of $100 a share in the months leading up to the big falls.

Company executives and insiders sold their stock valued at $496 million in 2021, according to SmartInsider, citing SEC filings. Virtually all sales were part of 10b5-1 plans or pre-planned sales programs. It’s unclear how many of the sales also involved option exercises or tax sales related to options.

The big sell-off started when the stock started to climb above $80 per share in the fall of 2020 and gained momentum in 2021 when the stock held above $100, filings show.

The company did not respond to requests for comment.

Peloton shares soared as sales and subscribers increased throughout the year first year of the corona pandemic. Consumers flocked to the product when they were looking for ways to work up a sweat without a gym membership. To meet the strong demand, Peloton invested in his business, to scurry ramp up productiong and Accelerate order fulfillment. But when the Covid vaccines rolled out, the company saw weaker demand and its shares started falling.

John Foley, the company’s CEO and co-founder, sold $119 million worth of shares as of November 2020, according to SmartInsider. Most of his sales were $110 a share or more. The sales were part of a pre-agreed 10b5-1 plan to “sell a limited number of the company’s stock for personal finance management purposes,” according to an SEC filing.

Although the plan called for the sale of up to 2.4 million shares by October 2022, Foley informed the board that he had ended the sale plan on August 30, 2021 after selling a total of 1 million shares. No reason was given for the termination, but on November 4, 2021, The company lowered its sales forecast and stocks plummeted.

The stock sales accounted for about 16% of Foley’s total stake in the company, excluding options. Including options, the sale represented about 5% of its holdings, according to SmartInsider.

Many top executives have also cashed out some of their holdings through timely sales. William Lynch, the company’s president, sold more than $105 million in stock last year, with $72 million sold in February at an average price of $144.95.

John Foley, co-founder and chief executive officer of Peloton Interactive Inc., center, speaks as Hisao Kushi, co-founder and chief legal officer of Peloton Interactive Inc., from left, Tom Cortese, co-founder and chief operating officer of Peloton Interactive Inc., Yony Feng, co-founder and chief technology officer of Peloton Interactive Inc., and Graham Stanton, co-founder of Peloton Interactive Inc., listen during the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., Thursday, May 26. Sept 2019

Michael Nagel | Bloomberg | Getty Images

Hisao Kushi, co-founder and chief legal and culture officer, sold more than $90 million of its shares — most at prices in excess of $110 per share. Other top sellers included the company’s chief product officer, Tom Cortese, who sold more than $60 million of its stock, and chief operating officer Mariana Garavaglia, who posted more than $25 million in sales.

Members of the board of directors have also cashed out their holdings, including Karen Boone, who sold more than $20 million worth of shares at prices in excess of $140 per share last February, according to documents.

Of course, Peloton insiders weren’t the only ones selling the stock during last year’s runup. With large stock sales by prominent executives such as jeff bezos and Elon Musk, total insider sale achieved a record $170 billion last year, up from $94 billion in 2020, according to SmartInsider. Historically, executives and insiders sell during or near the highs of their stock prices.

“One of the best accepted facts from decades of insider trading research is that corporate insiders buy near bottoms and sell near tops,” said Daniel Taylor, associate professor at the Wharton School.

At the moment, Peloton is flirting with new lows. The stock came very close to falling below it $29 per share IPO price, after CNBC reported that the company had hired McKinsey to review its cost structure, an effort that could result in job cuts and store closures. Peloton is also effectively increasing product prices later this month when that happens begins charging for shipping and installation.