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Shift4 Payments CEO Pledges Fifteen Million Shares For Margin Loan
Shares pledged are the equivalent of a quarter of shares outstanding and come after the payment firm overstated Operating cash flow 400%.
March 16, 2023
Shift4 Payments CEO Jared Isaacman tells us:
"I repaid and reduced the size of my prior margin loan from 2021 by more than 50% and pledged additional shares so there was no possibility of it ever getting called. Net loan to value of pledged shares is like ~10%"
The founder and Chief Executive Officer of Shift4 Payments (FOUR), an omnichannel payments solution, is pledging additional equity as collateral for a margin loan. Jared Isaacman, according to Shift4 Payments latest annual report, is taking out a new margin loan to repay and replace an older loan.
In addition to what’s characterized as “other collateral” Isaacman is the sole owner of Rook Holdings Inc., which also pledged “LLC Interests” and shares of Shift4 Payments’ Class A and Class B common stock— collectively Rook Units— to secure the margin loan.
The LLC Interests, according to Isaacman’s filings, may be redeemed by Rook SPV, a subsidiary of Rook, at any time for shares of Shift4 Payments’ Class A Common Stock on a 1-to-1 basis.
One year ago, Isaacman’s margin loan was collateralized by ten million Rock units. In the latest annual report, Shift4 Payments revealed Isaacman’s new loan required a 50% increase in collateral:
“If Rook were to default on its obligations under the margin loan and fail to cure such default, the lender would have the right to exchange and sell up to 15,000,000 Rook Units to satisfy Rook’s obligation.”
Regarding the size of Isaacman’s loan, Shift4 Payments says only that the “number of units are currently valued in excess of the margin loan.” Based on the closing price of Shift4 Payments share price on the date of the filing, Isaacman’s new loan is less than $1.04 billion, or approximately $100 million based on Isaacman's response to DuDil.
In the event of default, the fifteen million shares Isaacman pledged and the lender could sell are the equivalent of approximately 26.2% of current shares outstanding. This figure does not include Class B and C shares.
Separately, in November 2022 Shift4 Payments revealed it had misstated the company’s financials in its 2021 annual report and in each of the first three quarters of 2022. The company classified customer acquisition costs as Investing activities rather than Operating activities on the cash flow statement.
Instead of an operating cash flow of $29.2 million, Shift4 Payments generated just $3 million in 2021. The company also restated 2020 and 2019 operating cash flows significantly lower.
Over the three year period, Shift4 Payments overstated Operating cash flow by $64.3 million, or 428.6%.
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