Peloton investor Blackwells Capital is calling on the resignation of the company's chief executive officer as its share price continues to plummet. The activist investor is also calling on Peloton's board to consider a possible sale of the company.
The investor, which holds less than a 5% stake in Peloton, is asking the company to consider a sale, stating that the brand is an attractive acquisition target for large tech or fitness-oriented companies.
Sources with knowledge in the matter said Blackwells believes that Peloton is rapidly deteriorating, and it is now weaker than it was before the pandemic. The investor, reportedly, places much of the blame on Peloton's CEO and chairman, John Foley.
Analysts said that Foley and those that support him own super-voting Class B shares. They control roughly 80% of the company's voting power, which means that it is unlikely that pressure from Blackwells will result in any significant changes within the company.
Peloton's stock price closed at $27.06 per share on Friday, way below the company's September 2019 initial public offering price of $29 per share. The company's current market valuation is around $8.8 billion, which is a stark contrast to the market valuation during its peak of nearly $50 billion last year.
Last week, the stock dropped by more than 20% after news broke that Peloton was planning to halt production. Sources said the company is planning to temporarily halt the production of its bikes and treadmills to help it assess and reset its inventory levels.
Foley responded to the reports and assured investors that Peloton was not "halting all production." He did acknowledge that manufacturing will be halted for some products so the company can "right-size" its inventory and for it to become more "flexible" as a business.
The company recently released its preliminary second-quarter earnings report, stating that it had managed to generate revenue of $1.14 billion for the three-month period. The company said it also ended the quarter with 2.77 million active subscribers.
Peloton is, reportedly, now working with consulting firm McKinsey & Co. to help it overhaul its business and look for ways to cut costs. The move comes as Peloton's core at-home fitness equipment business continues to slow down as the U.S. slowly reopens.
The company recently announced that it would be increasing prices for its services due to inflation and increased supply chain expenses. Next month, customers can expect to pay hundreds of dollars more in setup and delivery fees for the company's bike and treadmill products. The planned increase was also heavily contested by Blackwells, sources familiar with the matter claimed.
