Activist investor calls on Peloton to fire CEO and explore sale
Peloton Interactive's troubles now include calls from an activist investor that the company oust co-founder and CEO John Foley and start looking for a possible buyer in the wake of a massive stock price drop over the past year.
The seller of home-fitness equipment would be an attractive target for a large technology or sportswear company like Apple or Nike, according to Blackwells Capital, which holds less than a 5% stake in Peloton.
Foley's failures include "misleading Peloton investors that the company did not need additional capital, just weeks before issuing $1 billion of equity," Blackwells Capital stated Monday in a letter to Peloton's board of directors. Foley being "reluctant to work with the Consumer Product Safety Commission" over a recall of its treadmills was listed as another misstep.
"We believe that no board exercising reasonable judgment could leave Mr. Foley in charge of Peloton," wrote Jason Aintabi, chief investment officer at Blackwells.
Peloton did not immediately respond to a request for comment.
Aintabi could well be waging an uphill battle, as Foley and other insiders yielded control of more than 80% of Peloton's voting power as of Sept. 30, according to a proxy filing.
Shares of Peloton were up more than 5% in early trade Monday. But Peloton shares are still down more than 80% from year-ago highs, and took a further hit last week after CNBC reported the company was suspending production of its bikes and treadmills.
In a statement Thursday, Foley denied the company is halting production of bikes and Treads, but he did confirm that Peloton is evaluating its structure and the size of its team.
Peloton in May recalled both its treadmill models after the death of a child was linked to the Tread+, as well as dozens of injuries including broken bones and cuts. The CPSC the prior month warned those with kids and pets to stop using the machines, citing multiple cases of people and animals being pulled under them.
Best known for its home-workout bike, outfitted with a screen that lets subscribers watch live or videotaped classes while cycling, Peloton introduced the Tread+ in 2018. With an avid customer base, the company went public in 2019 and saw its stock soar to as high as $167 in late 2020, as more Americans turned to exercising at home amid the COVID-19 pandemic.
By 2021, Peloton was growing fast, with revenues topping $4 billion. But profits remained elusive as the company sought to quickly expand its market share both in the U.S. and abroad, including expensive ad campaigns to promote the brand.
Those efforts were hindered in December, when a reboot of the "Sex and the City" series featured a character from the show suffering a fatal heart attack after taking a spin class using one of its bikes.
More recently, the season 6 premier of Showtime's "Billions" portrayed a character having a heart attack on a Peloton bike, but surviving.
Peloton took issue with the plot twist, saying in a tweet that it had not agreed to having its brand used on the television show.
In its most recent quarter, Peloton reported losses of $376 million on revenue of $805.2 million. The company is scheduled to announce its second-quarter results on February 8.
