A federal judge has dismissed the shareholder lawsuit accusing Peloton of misleading investors about excess inventory as the COVID-19 pandemic wound down. This is the third time the case has been dismissed.
U.S. District Judge Andrew L. Carter, Jr. in Manhattan issued a 24-page decision dismissing the case on August 27th, ruling that shareholders did not show Peloton and its executives intended to defraud them.
The defendants were Peloton, co-founder John Foley, who stepped down as CEO in February 2022, former President William Lynch, and former CFO Jill Woodworth.
Only three statements were still at issue. The first was Foley calling a bike price cut an “absolutely offensive” business strategy on the August 26, 2021 earnings call, the same day Peloton lowered the price of the original Bike by $400 to $1,495. The other two were warnings in Peloton’s Form 10-K and Form 10-Q, filed August 26 and November 4, 2021, that described “excess inventory levels” as a hypothetical risk.
The case was originally filed in November 2021 by the City of Hialeah Employees’ Retirement System and was later consolidated with Netherlands-based Robeco Capital Growth Funds SICAV as lead plaintiff. It was dismissed in 2023 and dismissed again in September 2024, before an appeals court revived part of it in August 2025 and sent it back to the judge. That ruling also cut the class period down to August 27, 2021 through January 19, 2022.
Carter ruled that most of the stock sales the shareholders called suspicious happened before that narrowed class period even began, and that the sales inside it were made under trading plans that predated the period or were automatic sales covering tax liabilities. The shareholders had argued the executives cancelled those plans early to avoid selling shares at depressed prices once bad news came out. The judge disagreed, writing that the executives stopped selling before the alleged fraud was revealed and kept holding stock that then lost value.
The judge also pointed to what Peloton was telling investors at the time. The company disclosed its inventory in precise dollar amounts, repeatedly warned that the pandemic made forecasting harder, and said it was deliberately building inventory ahead of demand to shorten delivery times heading into the holidays. Carter wrote that continuing to build inventory while disclosing those figures in SEC filings undermines any argument that Peloton believed it had too much inventory at the start of the class period.
He noted that Peloton was never accused of misstating its inventory or its sales, only of failing to call those inventory levels excessive, and that whether they were excessive depended on holiday demand that had not happened yet. His conclusion was that “innocent intent is the more compelling inference here.”
The case is not completely over. Carter declined to grant leave to amend, but left the door open for the shareholders to file a motion asking to submit a third amended complaint, which is due by September 28, 2026.
This is the second shareholder lawsuit against Peloton to be dismissed this year, after a judge in Brooklyn dismissed the Solomon v. Peloton case over bike rust and the 2023 seat post recall on March 31st.
The news of this dismissal was first reported by Reuters. A lawyer for the shareholders declined to comment to Reuter, and Peloton and lawyers for the defendants did not immediately respond to requests for comment at the time of their report.
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