Peloton activist has right diagnosis, dubious cure

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NEW YORK, Jan 25 (Reuters Breakingviews) - Peloton Interactive’s (PTON.O) exhaustion has attracted the attention of an activist. Blackwells Capital is pushing for a leadership change and a sale of the online fitness firm. The diagnosis is right, but the cure – suggesting a big name like Apple (AAPL.O) or Walt Disney (DIS.N) might buy the home-exercise outfit – is dubious.

Blackwells boss Jason Aintabi on Monday sent a letter to Peloton’s board calling for the ouster of John Foley, the co-founder and chief executive. Blackwells contends that the company has squandered the opportunity handed to it during the pandemic.

Home-bound consumers snapped up Peloton's pricey bikes and treadmills, and revenue more than doubled to $4 billion for the year ending June 2021 from a year earlier. But Foley became overly optimistic read more . For instance, he expanded the company's manufacturing footprint by blowing $420 million on Precor in 2020 – only to temporarily suspend the production of exercise equipment last week because of the lack of demand, according to CNBC.

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Peloton’s shares are down more than 80% from their peak in January 2021, and now trade below the company's initial public offering price of $29 per share in September 2019, a few months before Covid-19 emerged. Clearly, Antaibi isn't wrong with his assessment of how the ride is going.

And the $9 billion Peloton might well benefit from new leadership if Foley, who also serves as chairman and has supervoting shares, could take enough of a back seat to let a new CEO get a grip. A sale isn’t a terrible idea either. Blackwells name-checks potential buyers including Apple, Disney, Sony (6758.T) and Nike . Most of those are wishful thinking. Apple has no history of making acquisitions this size and the Magic Kingdom is focusing on streaming services for TV.

It's true Peloton might fit with an exercise brand like Lululemon Athletica (LULU.O)or, conceivably, Nike. Any such move would, however, be in the hands of Foley and other executive officers, who control over 80% of investor votes at Peloton. A cynic might suggest they'd be inclined towards an option that lets them keep their jobs. Other shareholders will probably be hoping Blackwells' move forces Foley to start taking some medicine.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)

(This story has been refiled to fix typo in third paragraph)

CONTEXT NEWS

- Activist investor Blackwells Capital on Jan. 24 sent a letter to Peloton Interactive’s board of directors calling for the removal of Chief Executive John Foley.

- Blackwells also wants the board to consider selling the company and named Apple, Walt Disney, Sony or Nike as possible buyers.

- Peloton’s shares fell 24% on Jan. 20 after a CNBC report said the company was temporarily halting the production of its bikes and treadmills because of a lack of demand. On Jan. 21, the company's stock closed at $27.06, down more than 80% from its peak in January 2021. Peloton priced its initial public offering in September 2019 at $29 per share.

- Peloton’s stock was trading up 5% in morning trade on Jan. 24,lending it a market value of $9 billion.

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Editing by Richard Beales and Sharon Lam

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