Blackwells Capital, an investment firm that has a significant stake of less than 5% in Peloton, penned an open letter to Peloton’s board of directors expressing “grave concerns about the performance and direction” of the fitness company. Noting that Peloton’s share price has declined 80% since its high and is now trading below the IPO price, Blackwells Capital argued Peloton executives and its board have squandered the opportunity since its wide consumer adoption accelerated by the COVID-19 pandemic.
The investment firm singled out Peloton CEO John Foley for the company’s failures, including the company’s heavily-criticized response to children becoming injured from its treadmills and signing a long-term, expensive office lease in New York. Blackwells also noted Foley owns a $55 million vacation home near the NYC office and hired his wife as a key executive.
“Shareholders have lost nearly $40 billion in wealth,” the letter stated. “Mr. Foley, in contrast, has sold stock regularly and repeatedly, reaping more than $115 million in proceeds. We believe that no board exercising reasonable judgment could leave Mr. Foley in charge of Peloton. The company has gotten too big, too complex and too damaged for Mr. Foley to lead it. And he should have enough self-awareness and enough self-interest, to resign as a director.”
Peloton was a darling brand during the COVID-19 pandemic as gyms and fitness centers temporarily closed and enacted new restrictions to reduce viral spread. However, the company recently stated it is halting production of its products as demand has waned.
In addition to calling for Foley’s head, Blackwells urged Peloton directors to put the company up for sale. The investment firm argued Peloton as a stand-alone company cannot fully exploit the opportunities for value. Instead, Peloton should sell to a technology, streaming, metaverse or sportswear brand, such as Apple, Disney, Sony or Nike.
“Given the mess that Peloton has become as an independent company, we are convinced that one or more of these strategic acquirors could provide significantly more value, with substantially less risk, than Peloton is likely to generate for its shareholders on its own,” Blackwells Capital wrote.