Shares of Peloton fell more than 80 percent from their highest level a year ago.
(Bloomberg) – Peloton Interactive Inc. received a letter from an investor activist asking him to fire his CEO and make a sale.
Blackwells Capital LLC, which has a stake of less than 5%, has called for the resignation of CEO and co-founder John Foley and wants Peloton to investigate the sale of the business. Peloton could be an attractive acquisition target for larger technology or fitness companies, according to a letter from an investor seen by Bloomberg.
Shares rose about 2% in New York on Monday morning.
Shares of Peloton fell more than 80% from their highest level a year ago as the gradual easing of pandemic-era restrictions fueled fears that the growth of the home fitness company would slow. Shares hit a nearly two-year low last week after CNBC announced that Peloton was temporarily suspending production of its bicycles and treadmills.
“As stocks are now traded below the IPO price and have fallen by more than 80% from their highest value, it is clear that the company, executives and board have squandered this opportunity,” wrote Jason Eintaby, chief investment officer at Blackwells. the letter.
Blackwells cites companies such as Apple Inc., Disney and Nike Inc. as potential buyers, and also accused Peloton of “not wanting to work with the Consumer Product Safety Commission.”
While Peloton recently hired McKinsey & Co. to evaluate its business and costs, it is unclear whether there are potential sales or whether Blackwells will be able to replace Foley. Former CEO of Barnes & Noble Inc. and cycling enthusiast founded the company after posting a video on Kickstarter in 2013. The CEO and other insiders controlled more than 80% of Peloton’s voice power as of Sept. 30, the WSJ reported.
The letter from Blackwells condemned the CEO’s management, citing failed forecasts and inconsistent strategy and management problems such as lack of financial control. It also said Foley misled investors by saying the company did not need more capital weeks before offering $ 1 billion worth of shares.
“We believe that no sound judgment can leave Mr. Foley in charge of Peloton,” Intabi wrote. “The company has become too big, too complex and too damaged for Mr. Foley to run. And he must have enough self-awareness and enough personal interest to resign as director. “
Peloton, which cut its annual forecast by about $ 1 billion, reported lower-than-expected revenue last week of $ 1.14 billion for the December quarter. Foley said in a statement that the company was taking steps to improve its prospects for profitability and optimize costs by pledging more information about its cost-cutting plan when Peloton unveiled its official earnings report on February 8th.
The company’s public image was also struck in December when the reboot of HBO Max “Sex and the City” killed a hero driving a peloton.
“The journey for Mr. Foley is over,” Intabi said. “This board must now draw a new path for Peloton on its own.
(Updates on stock trading in the third paragraph.)
– With the assistance of Mark German and Vlad Savov.