A minority investor in Peloton – Blackwells Capital, which owns less than 5% of the company – has published an open letter calling for Peloton to explore a sale and fire CEO John Foley.
The full letter was published in a press release this morning, though the Wall Street Journal first broke the news last night. The letter reads, in part:
We believe the pandemic offered Peloton a tremendous and unexpected opportunity to accelerate consumer adoption of its category-defining products and drive performance of the business and value for shareholders. With the stock now trading below the IPO price, and down more than 80% from its high, it is clear that the Company, the executives and the Board have squandered this opportunity.
Blackwells Capital goes on to assert that Peloton is in a worse-off situation today than before the Covid-19 pandemic, underperforming every other company listed on the NASDAQ 100 index over the past year.
Blackwells Capital propose two solutions they say will put Peloton back on track. The first is the firing of CEO and founder, John Foley. The letter lists ten examples of what they say are “repeated failures to effectively lead Peloton,” including pricing strategy, handling of the Tread+ recall, and misleading investors that there was no need for additional funds before issuing $1 billion in equity a short time later.
The second solution, according to Blackwells Capital, is for Peloton to explore a potential sale to another company. The letter declares:
Peloton has a large and loyal customer base, skilled employees, great technology and content, and a respected brand. A stand-alone Peloton, however, will still not be able to fully exploit the opportunities its assets and brand enable – especially now with a pressured balance sheet, significant cash burn and loss of investor confidence.
Blackwells Capital maintains that Peloton would be a tremendously attractive acquisition to a number of companies, such as Disney, Nike, and Apple, and such an acquisition would maximize the value for shareholders more than Peloton is currently able to do on its own.
While the letter is certainly making news this morning, it’s worth noting again that Blackwells Capital owns less than 5% of the company. The Wall Street Journal points out:
Still, it would take significant pressure from other shareholders to prompt change, given that Mr. Foley and other insiders have supervoting Class B shares. Those shares gave them control over 80% of Peloton’s voting power as of Sept. 30, according to a company proxy filing.
This development follows an eventful week for Peloton: they hired an outside consulting firm to assist with cost cuts; announced the delayed opening of the Peloton Output Park; and CEO John Foley published an open letter to the company to address these and other recent issues before the Q2 2022 Earnings Call on February 8.
You can read the entire letter from Blackwells Capital here.
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I couldn’t agree more with Blackwell Capital More,
I’ve been a devout supporter and owner of a number of Peloton pieces of fitness equipment, Hell my gym is plastered with inspirational photos of Peloton . The Equipment is solidly built and would recommend the equipment to anyone but pelotons management is a Joke . It’s. Shame that it’s CEO can’t see the flaws, They took away the scenic rides then under pressure return them but know way as good as they used to be . There 100s maybe thousands of scenic areas in the United States that could be implemented , their competition even uses GPS and you can outline your own scenic routes . There’s no reason that more 30min 35min 40min 45min rides could not be added . Not all of its members need or want instructions from their instructors ! Change the management NOW … and it might be possible to save the Company!
Someone actually likes the scenic rides?? Well… there you go….
Hate to say it but there’s a lot right in that letter. The pandemic was a literal once in a lifetime opportunity and it has been wasted; worse than wasted, the actions taken have made it actively harmful to the company’s trajectory. I love the bike, I love the classes, I wish I had space for a tread, but I am now nervous I’ve made this big investment and I’ll end up in a couple of years with a big old bricked bike. I really hope a bigger fish buys peloton.
DO NOT BE FOOLED BY BLACKWELL’S CAPITAL- they are not here to help customers, employees, or long term shareholders. They want to take advantage of a low share price to force a quick sale. They want the buyout premium and they don’t care what happens to the company after that.
They did the same thing to Supervalu. Put out a media smear campaign against company management and then put up their own supposedly better candidates up for election to the board of directors. These candidates were fake- they never took any position at the company, they never executed any sort of turnaround. They just used this to pressure management into accepting a buyout from a competitor at a share price that locked in losses for most long term investors.
The competing grocery chain (UNFI) had no idea what to do with Supervalu and basically just shut down the stores and sold off the company bit by bit. They buyout absolutely didn’t “save the company”, it killed it.
TLDR; Whatever you may think of Peloton’s current management- Blackwells is NOT an improvement. A buyout will NOT be an improvement. They are looking for a quick flip.