Activist investor will call on Peloton to fire its CEO

An activist investor wants Peloton Interactive Inc. to fire its chief executive and consider a sale after the stationary bike maker’s stock fell more than 80% from its peak as growth slowed.

Blackwells Capital LLC has a large stake of less than 5% 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 company believes Peloton could be an attractive acquisition target for larger tech or fitness-focused companies, the sources said.

Once a pandemic darling as housebound customers ordered its exercise equipment that pairs with virtual classes, Peloton’s stock is trading below its September 2019 initial public offering price of $29. per share.

Shares of Peloton plunged 24% on Thursday after a CNBC report that it was temporarily halting production of its products due to a drop in demand. Mr. Foley said in a later letter to employees that Peloton was reviewing its workforce size and resetting production levels, as the company adjusted to more seasonal demand for its equipment. He also said the report was incomplete.

Foley also said in a statement that day that the company was “taking significant corrective action to improve our profitability outlook and optimize our costs” and would share more details with the results on February 8. The company reported preliminary 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 it would start charging customers hundreds of dollars in delivery and installation fees for its bikes and treadmills. In August, Peloton reduced the list price of its original bike by 20%.

Peloton stock rebounded 12% on Friday, closing at $27.06 and giving the company a market value of nearly $9 billion. At its peak about a year ago, the New York company had a market value of around $50 billion.

Blackwells argues the business is weaker today than before the pandemic, the people said. The company largely blames Mr Foley, who is also chairman, and believes Peloton would be better off as part of a bigger company, they said.

While the fund isn’t exactly a household name, Blackwells has a history of successful campaigning, and analysts said Peloton could be vulnerable to a challenge or investor takeover, given its recent woes. . Blackwells, founded in 2016 by Jason Aintabi, previously restless at Monmouth Real Estate Investment Corp.

, a real estate investment trust that agreed to a sale of approximately $4 billion, and in another REIT, Colony Capital Inc.,

and colony credit. Colony’s multi-year campaign resulted in the resignation of former CEO Tom Barrack and an overhaul of the company, now known as DigitalBridge Group Inc.

Still, it would take significant pressure from other shareholders to bring about a change, given that Mr. Foley and other insiders hold high-voting Class B shares. Those shares gave them control of more than 80% of Peloton’s voting rights as of September 30, according to a proxy filing from the company.

Blackwells criticizes Mr Foley for a long list of actions, including what he says are inconsistent pricing and manufacturing strategies, the people said.

Mr. Foley, a former Barnes & Noble Inc. executive, and others co-founded the company in 2012 and began selling bikes in 2014.

Write to Cara Lombardo at [email protected]

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