Masimo's billionaire CEO put shares on margin to get cash while keeping ownership ahead of proxy fight

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Billionaire Masimo founder Joe Kiani, best known for his successful legal fight 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 filings from earlier this week. Borrowing against that much of a stake is unusual for executives, but may be helpful as the company prepares for a fight with an activist aiming to take control of the board. The move allows Kiani, the company's CEO and chairman, to maintain his stake and voting power while also getting money he says he needs for family reasons. Many medical-tech peers bar such moves, and it could leave Kiani susceptible to margin calls if Masimo's stock falls below a certain threshold. Kiani has just under 4 million Masimo shares, or around 7.5% of the company, according to FactSet data. Masimo, which makes wearables and health monitoring products, is preparing to fend off a second proxy fight waged by Quentin Koffey's Politan Capital Management. Kiani described Koffey as "destructive" in a March CNBC interview. Masimo shares are up 15% this year, lifting the company's market cap past $7 billion. The stock had a volatile run in the back half of 2023, falling 47% in the third quarter before gaining 34% in the fourth. Politan controls 8.9% of Masimo shares. While that's bigger than Kiani's stake, even before pledged shares are weighed, regulatory filings show that the CEO has options that could boost his holdings to 9.2% if exercised. Politan already won two seats on Masimo's six-person board in a contentious 2023 proxy fight, but announced last month that it would seek two more seats, including Kiani's, to cement control. Kiani, 59, pledged 2.97 million Masimo shares as of April, valued at $397 million, as collateral against "personal loans." The company said in its annual filing Kiani had family "financial planning objectives" that would require him to sell his stock, but that he "did not want to diminish his shareholdings." His objectives weren't spelled out in the filings. "The pledge of shares was pre-approved by the Board and reflects Mr. Kiani's conviction in the value of Masimo stock despite the short-term decline in the stock price during the second half of 2023," a Masimo spokesman said in an emailed statement. "Rather than sell his pledged shares, Mr. Kiani increased his pledge to maintain his stock ownership." The spokesperson added that Kiani purchased about $7 million worth of Masimo stock in the second half of 2022 and the first half of 2023.