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.
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