iRobot’s parting gifts for executives

You’ve probably already seen, or at least heard, the news that iRobot filied for bankruptcy yesterday and will be sold to its China-based parts supplier, Picea. If not, here’s the press release from iRobot that was filed first thing this morning.

That press release was part of an 8-K that included various agreements related to the Chapter 11 petition. But the part that caught my attention were the hefty retention and transition bonuses being paid to four of its named executives including CEO Gary Cohen and President Jeffrey Engel. Both men stand to receive around $3 million for remaining in their jobs through April 2026. Two other executives — CFO Karian Wong and HR Chief Jules Connelly will also each receive parting gifts: Wong’s will be around $1.45 million and Connelly’s will be around $1 million.

To be fair, all four executives joined the company in 2024. In other words, they were all hired to turn around what was once billed as “the world’s preeminent consumer-robotics company”. The company, which was created by three engineers at MIT in 1990, went public in 2005, about three years after introducing the signature Roomba vacuum. After various ups and downs, the stock was trading as high as $133 a share in Feb. 2021, when many people were stuck in their homes due to Covid. But since then, the stock has been in virtual free-fall. On Friday, the shares closed at $4.32 and today it is trading at around $1.20 a share.

When Cohen was hired in May 2024, he was given 290,000 time-based RSUs and an additional 435,000 performance-based RSUs. In the most recent proxy, his stock awards were valued at $6.2 million. The other executives, all of whom were hired in 2024, also received large slugs of options. And all of them are essentially worthless now. It’s important to point out, though, that the options were just one part of the executive’s total compensation. They also got regular salaries as well as bonuses.

It’s understandable that these executives need to be paid something to stick around. As described in today’s 8-K,. all of the payments to the executives are cash payments that were paid on Dec. 10, four days before the company filed for bankruptcy. We’ve certainly seen this before, at companies like Spirit Airlines, which gave its executives “one-time bonuses” twice. But it’s never a good look when shareholders lose everything and the executives walk away relatively unscathed.