Activist investor to call on Peloton to fire its CEO
Blackwells Capital wants the stationary-bike maker to fire its chief executive and explore a sale after the stock slumped more than 80 per cent from its high.
An activist investor wants Peloton Interactive to fire its chief executive and explore a sale after the stationary-bike maker’s stock plummeted more than 80 per cent from its high, as growth slowed.
Blackwells Capital has a significant stake of less than 5 per cent in Peloton and is preparing to push the company’s board to fire CEO John Foley and pursue a sale, according to people familiar with the matter. The firm believes Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies, the people said.
Once a pandemic darling as homebound customers ordered its exercise equipment that pairs with virtual classes, Peloton’s stock is trading below its September 2019 initial public offering price of $US29 a share.
Peloton’s shares plunged 24 per cent Thursday after a CNBC report that it was temporarily halting production of its products because of decreasing demand. Mr Foley said in a subsequent letter to employees that Peloton is reviewing the size of its workforce and resetting production levels, as the company adapts to more seasonal demand for its equipment. He also said the report was incomplete.
Mr Foley also said in a statement that day that the company is “taking significant corrective actions to improve our profitability outlook and optimise our costs” and would share more details with earnings February 8. The company reported preliminary second-quarter revenue of $US1.14bn and said it ended the quarter with 2.77 million subscribers.
Earlier last week, Peloton disclosed on its website that it would start charging customers hundreds of dollars in delivery fees and setup charges for its bikes and treadmills. In August, Peloton cut the list price of its original bike by 20 per cent.
Peloton share’s rebounded 12 per cent Friday, closing at $US27.06 and giving the company a market value of nearly $US9bn. At its high around a year ago, the New York City company had a market value of around $US50bn.
Blackwells argues that the company is weaker today than before the pandemic, the people said. The firm places much of the blame on Mr Foley, who is also chairman, and believes Peloton would be better off as part of a larger company, they said.
While the fund is not exactly a household name, Blackwells has run successful activist campaigns before, and analysts have said Peloton could be vulnerable to an investor challenge or takeover, given its recent woes. Blackwells, founded in 2016 by Jason Aintabi, previously agitated at Monmouth Real Estate Investment, a real estate investment trust that agreed to a roughly $US4bn sale, and at another REIT, Colony Capital and Colony Credit. The multi-year Colony campaign resulted in former CEO Tom Barrack’s stepping down and a revamp of the business, now known as DigitalBridge.
Still, it would take significant pressure from other shareholders to prompt change, given that Mr. Foley and other insiders have super-voting Class B shares. Those shares gave them control over 80 per cent of Peloton’s voting power as of September 30, according to a company proxy filing.
Blackwells is critical of Mr Foley for a laundry list of actions, including what it says are inconsistent pricing and manufacturing strategies, the people said.
Mr Foley, a former Barnes & Noble executive, and others co-founded the company in 2012 and began selling bikes in 2014.
The Wall Street Journal
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