Masimo founder and CEO Joe Kiani addresses a press conference in Bangalore on January 2, 2017.
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billionaire Chewing founder Joe Kiani, best known for his successful legal battle against apple and his friendship with President Joe Biden, has borrowed against half of his $660 million stake in the health technology company rather than sell his stock, according to corporate deposits since the beginning of this week.
Borrowing against such a large stake is unusual for executives, but could be useful as the company prepares for a battle with an activist aiming to take control of the board. The move allows Kiani, the company’s CEO and chairman, to keep his stake and voting power while getting money he says he needs for family reasons.
Many medtech peers ban such moves, and it could leave Kiani vulnerable to write-offs if Masimo’s stock falls below a certain threshold. Kiani owns just under 4 million Masimo shares, or about 7.5 percent of the company, according to FactSet data.
Masimo, which makes wearables and health-monitoring products, is preparing to fend off a second proxy fight being waged by Quentin Koffey’s Politan Capital Management. Kiani described Koffey as “devastating” in an interview with CNBC in March.
Shares of Masimo are up 15% year to date, bringing the company’s market capitalization to $7 billion. The stock had a rocky run in the second half of 2023, falling 47% in the third quarter before surging 34% in the fourth.
Politan controls 8.9% of Masimo’s shares. Although this is larger than Kiani’s stake, even before the pledged shares are weighed, regulatory filings show that the CEO has options that could increase his holdings to 9.2% if exercised.
Politan already won two seats on Masimo’s six-member board in a contested proxy race in 2023 and announced last month that he would seek two more seats, including Kiani, to strengthen control.
Kiani, 59, pledged 2.97 million Masimo shares in April, worth $397 million, as collateral against “personal loans.” The company said in its annual filing that Kiani had family “financial goals” that would require him to sell his shares, but that he “did not want to dilute his shares.” His goals were not specified in the records.
“The pledging of the shares was pre-approved by the Board of Directors and reflects Mr. Kiani’s belief in the value of Masimo’s stock despite the short-term share price decline in the second half of 2023,” a Masimo spokesman said in a statement sent via e-mail. . “Instead of selling his pledged shares, Mr Kiani increased his commitment to retain ownership.”
The spokesman added that Kiani bought about $7 million worth of Masimo shares in the second half of 2022 and the first half of 2023.
The Masimo logo is seen at the Masimo headquarters on December 27, 2023 in Irvine, California.
Mario Tama | Getty Images
Chiani is a major Democratic Party donor who is reportedly close to the president. He also has an 8,000-acre winery in Santa Ynez, California, near Santa Barbara. The borrowing is an increase from last year, when Kiani pledged only 400,000 shares as collateral.
Masimo’s board of directors also includes Bob Chapek, who joined In January, almost a year after his ouster by Disney CEO.
Several of Masimo’s peers, such as Nimble, Stryker and Medtronic, do not allow executives to pledge their shares. Companies generally frown on stock pledging, although some, including Masimo, allow it with board approval. Equity-backed lending, or “Pawnshops,” generally require a borrower to sell their shares if they fall below a certain value, which in the case of large shareholders can further depress the share price.
Masimo’s previous proxy fight was marked by litigation between the two sides that led to Politan winning $18 million in legal fees after he forced the company to drop an attempt to thwart the investment firm. There were also personal attacks. In regulatory depositsthe company described Koffey as someone with a “swagger” that was “not unlike his more prominent peer Bill Ackman.”
The major shareholders, including Vanguard, sided with the activist investor, who said Masimo had been marred by poor governance practices and its acquisition of Sound United, a consumer audio company. Masimo shares fell 37% on the day the deal was made was announced in February 2022.
Last month, Masimo said it would spin off its consumer business, an announcement that boosted the stock. When Politan announced its second campaign a few days later, stocks rose even higher. Politan said news of the spinoff, which came after the bell on Friday and shortly before the activist announced his second campaign, was “broken” when the company learned of those plans.
Masimo denied this claim. The company has yet to file a proxy statement or schedule an annual meeting.
Masimo has had some success in recent months. The company followed up with a high-profile patent lawsuit against Apple, alleging that the company infringed on the pulse oximeter technology for the Apple Watch. After some initial setbacks, Masimo won a ruling that restricted the sale of certain watches. The two companies remain in negotiations on the matter.