Activist investor asks Peloton to fire its CEO
An activist investor wants Peloton Interactive Inc. to fire its CEO and explore a sale after the shareholder of the stationary bike maker fell more than 80% from the highest, as growth slowed.
Blackwells Capital LLC has a significant stake of less than 5% in the Peloton and is preparing to pressure the company’s board to fire CEO John Foley and pursue a sale, according to people familiar with the matter. The company believes Peloton can be an attractive acquisition target for larger technology or training-oriented companies, the people said.
Once a pandemic darling as a home customer ordered his exercise equipment paired with virtual classes, Peloton’s share is traded below the first share price in September 201[ads1]9 at $ 29 per share.
Peloton’s shares plunged 24% on Thursday after a CNBC report that they temporarily stopped production of their products due to declining demand. Mr. Foley said in a subsequent letter to employees that Peloton is considering the size of the workforce and resetting production levels, as the company adapts to more seasonal demand for the equipment. He also said the report was incomplete.
Mr. Foley also said in a statement that day that the company “is taking significant corrective action to improve our profitability outlook and optimize our costs” and will share more details with earnings on February 8. The company currently reported second-quarter revenue of $ 1.14 billion and said it ended the quarter with 2.77 million subscribers.
Earlier last week, Peloton revealed on its website that they would start charging customers hundreds of dollars in delivery and installation fees for bicycles and treadmills. In August, the Peloton cut the list price of its original bike by 20%.
The peloton stock fell 12% on Friday, closing at $ 27.06, giving the company a market value of almost $ 9 billion. At its peak about a year ago, the New York City company had a market value of around $ 50 billion.
Blackwells claims that the company is weaker today than before the pandemic, the people said. The company places much of the blame on Mr. Foley, who is also chairman, and believes Peloton would feel better as part of a larger company, they said.
Although the fund is not exactly a household name, Blackwells has run successful activist campaigns before, and analysts have said the Peloton may be vulnerable to an investor challenge or takeover, given its recent problems. Blackwells, founded in 2016 by Jason Aintabi, previously excited about Monmouth Real Estate Investment Corp.
, a real estate investment fund that agreed to a sale for about $ 4 billion, and by another REIT, Colony Capital Inc.,
and Colony Credit. The multi-year Colony campaign resulted in the resignation of former CEO Tom Barrack and a renewal of the business, now known as DigitalBridge Group Inc.
Nevertheless, it will require significant pressure from other shareholders to bring about change, given that Mr. Foley and other insiders have Class B shares with a super vote. These shares gave them control of 80% of Peloton’s voting rights as of September 30, according to a proxy file from the company.
Blackwells is critical of Mr. Foley for a laundry list of actions, including what it says are inconsistent pricing and production strategies, the people said.
Mr. Foley, a former manager of Barnes & Noble Inc., and others co-founded the company in 2012 and began selling bicycles in 2014.
Write to Cara Lombardo at cara.lombardo@wsj.com
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