Activist investor Blackwells Capital has moved to oust the boss of beleaguered home-fitness firm Peloton after it was revealed that the company was scaling back production last week.
In a letter to Peloton’s directors, Blackwells’ chief investment officer Jason Aintabi called for chief executive John Foley to be fired immediately due to his “repeated failures” in leadership.
Aintabi cited a list of failures including misleading investors that the company did not need additional capital, just weeks before issuing $1 billion of equity; “vacillating on pricing strategy”; and failing to ensure that the firm had effective internal controls over financial reporting, leading to a warning from auditors.
Blackwells, which owns five per cent of the firm, said that the board should prioritise returns for investors by targeting an acquisition by a tech or fitness giant.
Aintabi wrote: “A stand-alone Peloton… 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.
“Peloton and its customer base would be extremely attractive to any number of technology, streaming, metaverse and sportswear companies (e.g. Apple, Disney, Sony, Nike), who could extend their presence in the home, in health and wellness and on the screen through Peloton.”
Aintabi said that the “ride for Mr. Foley is over” and the board now must “chart a new path” for the firm.
The calls come after it was revealed by CNBC that Peloton was scaling back production last week as the booming demand seen through the pandemic had begun to tail off.
Foley denied that that the firm was pausing production entirely but confirmed it was “resetting our production levels for sustainable growth.”
Shares in Peloton plunged more than 20 per cent after CNBC reported that production had been halted.
Peloton’s share price woes follow a spate of sell-offs in so-called ‘stay at home stocks’ which benefited through covid-lockdowns.
Gregori Volokhine, president of Meeschaert Financial Services, told AFP that Netflix, Amazon, PayPal, eBay and Etsy have all fallen between 20 and 50 percent from their peaks.
The Virtual Work and Life Multisector ETF, launched by asset management giant BlackRock to track companies that would benefit from lockdowns, reflects the signs that investors are beginning to flee pandemic darlings. The ETF has plunged nearly 12 per cent since the start of the year.