The peloton came out on top in 2020. Its own supply chain concerns had posed a challenge, but these were merely side consequences of the company’s meteoric rise. It just could not keep up with demand, which is one of the better difficulties for a growing company to have. As P.T. Barnum may or may not have ever stated, always leave them wanting more. Before most of us knew anything about emerging coronaviruses, the connected fitness firm had already gained a cultish following in various affluent groups. The epidemic, on the other hand, propelled Peloton’s success beyond what most could have imagined.
Gyms all across the world began to close, and with everyone trapped indoors, home fitness became a viable option. The peloton was a hit because it provided greater connectedness in a socially disconnected environment. Peloton’s stock rose from roughly $30 at the start of 2020 to over $160 in the last days of the year, thanks to investor interest. Things took a turn for the worse in 2021, with Peloton dropping to roughly $36 by the end of the year.
The downward trend has been maintained. Things at Peloton struck rock bottom last week. The company appears to be on high alert as demand continues to erode when gyms reopen. Peloton’s top brass appear to have perceived the pandemic as less of a once-in-a-100-year event and more of the beginnings of something bigger, with hundreds of millions spent on manufacturing to match a spike in demand. Peloton lost ground once it revealed that the company had hired McKinsey to help with restructuring and layoffs. Further claims, which CEO John Foley largely rejected, stated the business was halting manufacturing across its treadmill and stationary bike lines, which would be bad news for the company’s worth.
Jason Aintabi, the chief investment officer of activist investor Blackwells Capital, wrote to Peloton’s board of directors this morning, demanding Foley’s immediate dismissal and urging the board to consider selling the company. Aintabi writes:
We believe the pandemic presented Peloton with a once-in-a-lifetime opportunity to accelerate consumer adoption of its category-defining products, thereby driving business success and shareholder value.
The stock is now trading below the IPO price and is down more than 80% from its high, indicating that the Company, its executives, and the Board of Directors have squandered this chance. Surprisingly, the Company is in a worse financial position today than it was before the pandemic, with high fixed expenses, excess inventory, a stale strategy, disgruntled staff, and thousands of angry stockholders. In addition, it is no surprise, given that Peloton has underperformed every other Nasdaq 100 firm over the last 12 months.
“Mr. Foley’s ride is over,” the letter concludes. This Board must now create a new course for Peloton on its own.” According to The Wall Street Journal, Blackwells, which purchased a minority investment in Peloton for less than 5%, alleges a laundry list of “leadership failings,” highlighting Peloton’s obvious roller coaster ride since the pandemic began. Foley’s handling of a big product recall following the death of a young child, moving his wife to an executive position within the company, and large expenditures in increased manufacturing capacity, which were eventually shuttered due to declining demand, are among the items on the list.
Foley broke his pre-earnings “silent time” last week to address some of the rumors swirling about the company, claiming that claims that it was halting all manufacturing were inaccurate. However, affirm that production and headcount modifications were unavoidable.
