A person walks past a Peloton store on January 20, 2022 in Coral Gables, Florida.
Joe Raedle | beautiful pictures
An activist is pushing Peloton Fire the company’s chief executive and consider selling when its stock price has plummeted, according to a person familiar with the matter.
Blackwells Capital, which has a stake of less than 5% in Peloton, believes Peloton could be an attractive acquisition target for larger tech or fitness companies, the person said.
Blackwells argue that Peloton is weaker today than it was before the Covid-19 pandemic. The company largely blames Chief Executive Officer John Foley, who is also chairman, according to the person, who requested anonymity to speak about the privacy issue.
Peloton declined to comment. A spokesperson for Blackwells did not immediately respond to CNBC’s request for comment. Foley also did not respond to a request for comment.
To be sure, Foley and other insiders have super-voting Class B shares, giving them control of more than 80% of Peloton’s voting rights as of September 30, according to a proxy filing. That means there will be significant pressure from other shareholders to make any changes at the company.
Shares of Peloton are currently trading below their September 2019 initial public offering price of $29. It closed on Friday at $27.06, giving the company a market capitalization of $8.8 billion. About a year ago, Peloton’s market value was close to $50 billion.
Last week, CNBC reported that Peloton is working with consulting firm McKinsey & Co. looking for businesses to cut costs, as momentum for home gym equipment slows. CNBC also reports that the company is plans to suspend production of bicycles and treadmills, on a comparison process, to help reset inventory levels. Shares of Peloton fell more than 20% on Thursday as a result of that news.
Reply, Foley said in a memo to workers that it is not true. Peloton is “pausing all production”. However, he said the company had to “right size” its inventory. He also said Peloton is considering job cuts to become a more flexible business.
On Thursday night, the company Preliminary second quarter earnings report $1.14 billion and said it ended the quarter with 2.77 million subscribers.
“We are taking significant corrective actions to improve our profit outlook and optimize our costs across the company,” Foley said in a statement alongside the second-quarter numbers.
Among other things, Blackwells was also critical of Peloton’s inconsistent pricing and production strategies, the person said.
Later this month, Peloton will begin charging customers hundreds of dollars more in setup and delivery fees for its Bike and Tread, blame historical inflation and increase in supply chain costs. Just last year, Peloton reduced the price of bicycles by about 20%.
The Wall Street Journal first reported on Blackwells news.
