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Peloton shares drop as critic claims he's found something "worse than the commercial"

Peloton ad goes viral amid backlash
Peloton's controversial ad goes viral and sparks backlash 02:07

Peloton's share price rolled further downhill Wednesday, as Peloton investors continued to feel the burn from a scathing Wall Street research report that comes on the heels of social media blowback from its widely mocked Christmas ad.

Shares of Peloton were down another $2.25 on Wednesday, after falling $2 on Tuesday, to $30.50. 

The critical research report has now cut roughly $1 billion off Peloton's stock market value. And that's after Peloton already lost $1.6 billion last week following the company's airing an ad in which a husband gifts one of its $2,300 internet-connected stationary bikes to his wife for the holidays. Critics called the ad sexist and tone deaf. 

Peloton holiday commercial sparks social media uproar 01:59

Citron Research's Andrew Left, well known on Wall Street for targeting companies he thinks have flawed business models and placing big bets their stocks will fall, said in the report that investors have "peddled themselves into a frenzy" about Peloton. He predicts that investors will soon tire on the exercise bike and streaming workout video producer.

Left is shorting the stock — betting that Peloton shares will fall — and predicted the company's shares will drop to $5 by the end of next year. That would be an 86% drop from where the share price stood at the close of trading Monday.

Peloton went public in September at $29 a share. The company still has a market cap of $8.6 billion, but pessimistic Left said Peloton's current investors could lose more than $7 billion in 2020. 

"Worse than the commercial"

In his report, Left says Peloton has similarities to GoPro, a company that came in hot with a must-have product but fizzled once competition ramped up. He raised questions about Peloton's ability to bring successful new products to market in the future. 

He also targeted CEO John Foley. "He has a reputation for 'loose lips' and 'shooting from the hip,' " Left wrote, adding the executive has a "hard time with the truth" and his "hubris" is "worse than the commercial."

The report points to two articles published earlier this year by CBS MoneyWatch, which questioned why Foley claimed Peloton was profitable when it was not and another that examined whether the company was using financing to artificially boost its sales.

Peloton did not respond to a request for comment by the Associated Press on the Citron Research report.

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