An activist fund is demanding the departure of the group’s CEO and the sale of the latter, while Peloton has lost 80% of its stock market value in one year.
For Peloton, nothing is going well. One of the star stocks of containment is today in turmoil, after its stock market share fell by 80% in one year. On Monday, the activist fund Blackwells Capital demanded the departure of the boss of the start-up, John Foley, but also the sale of the group specializing in home sports.
Unavailable in France, Peloton’s connected exercise bikes are a phenomenon across the Atlantic. They have revolutionized the practice of sport at home thanks to a few ingredients. These bikes are equipped with a large touch screen, allowing their owners to follow a variety of courses every day, live or on demand. Users can video chat with their friends who are in the same course. The group has expanded to other sports activities, such as running, yoga, pilates, fitness…
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But all this has a cost. A Peloton connected bike costs between 1500 and 2500 dollars, to which must be added a mandatory subscription of 40 dollars per month. This has not prevented the group from gaining 1 million new subscribers since the start of the Covid-19 pandemic, for a total of 2.7 million active users. The latter are very loyal: only 8% cancel their subscription during the first year.
Poor inventory management
But Peloton has mishandled the influx of demand for its connected bikes and treadmills. The latter skyrocketed in the midst of the pandemic, leading to stockouts. The company therefore invested to beef up its production capacity, betting that consumer demand would continue to climb. This was without taking into account the fierce competition from other high-end connected fitness players – Tonal, Hydrow, Mirror… -, the reopening of gyms, but also a price positioning that makes Peloton inaccessible to many wearers. cash.
The group therefore finds itself with thousands of bicycles and treadmills under its arm and has decided to temporarily stop the production of new equipment. The news, revealed by CNBC last week, caused Peloton stock to plummet 25% on the stock market.
Hence the desire of Blackwells Capital to remove the CEO of Peloton. “The company is in a less favorable situation today than before the pandemic with high fixed costs, too much inventory, a weak strategy, discouraged employees and disgruntled shareholders», Writes in a vitriolic letter Jason Aintabi, head of investments for this fund, denouncing the «persistent failures of the management team“.
A CEO pushed out?
Jason Aintabi points to the enrichment of John Foley, “who regularly and repeatedly sold shares, reaping more than $115 million in profits“, while at the same time, “shareholders lost nearly $40 billion.He also bemoans the founding CEO’s inability to correctly estimate consumer demand. He criticizes him for having changed the pricing policy on numerous occasions “confusing consumers, markets and analysts“, to have deceived the investors on the needs for capital of the group, or even to have hired his wife.
A dezincification in order aimed at “fire John Foley immediately“. “Peloton has become too big, too complex, and too damaged a company to be run by John Foley. He should realize this and resign.“, stings Blackwells Capital.
The fund is pushing for Peloton to be put up for sale in order to better expand. “Peloton and its customers would be very attractive to groups coming from the world of technology, streaming, metaverse and sports equipment for example Apple, Disney, Sony, Nikewrites Jason Aintabi. “Given the mess that Peloton has gotten itself into as an independent company, we are convinced that one or more of these strategic acquirers could bring much more value and generate much less risk for shareholders than is likely to do it Peloton alone“.
It remains to be seen whether these requests will be followed up. Peloton is due to present its next quarterly results, which will be closely scrutinized, on February 8.
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