At-home exercise equipment brand Peloton Interactive (NASDAQ:PTON) seems to be plagued by bad news. Slowed sales, halted production, increased prices, plummeting stock value, and insider trading are just some of the company’s woes. However, some investors have a hopeful outlook. One of them is activist firm Blackwells Capital.
With a new stake in Peloton, Blackwells wants to make big changes to the company, starting with firing its CEO. Will Peloton fire its CEO as a result of this push?
Blackwells Capital gained significant stake in PTON.
Blackwells Capital is a New York City activist investment firm focused on special situation investing. It seems that Peloton is a special case of its own as Blackwells acquired a nearly 5 percent stake in the publicly traded company.
Blackwells is using that stake to push for changes it thinks will propel Peloton into the green moving forward.
The activist investor wants Peloton to make two big changes.
As for what Blackwells wants to change at Peloton, the propositions are huge. First, Blackwells wants Peloton to fire its chief executive. John Foley co-founded Peloton and has been chair of the company’s board since 2015.
On Jan. 20, as the stock plunged by about a third, Foley published in a letter, “We’ve experienced leaks containing confidential information that have led to a flurry of speculative articles in the press. The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy. It has saddened me to know you read these things without the clarity and context that you deserve.”
According to Foley, claims that Peloton was halting production for all bikes and treads were false, but he didn’t provide a correction.
In response to Foley’s leadership, Blackwells' chief investment officer Jason Aintabi wrote, “Mr. Foley must be held accountable for his repeated failures to effectively lead Peloton.”
Blackwells cited 10 key issues it found with Foley’s leadership, including nepotism, intentional lack of transparency, and difficulty forecasting demand.
The second change Blackwells proposes is to put Peloton up for sale as a way to maximize shareholder value. “Peloton and its customer base would be extremely attractive to any number of technology, streaming, metaverse and sportswear companies,” Aintabi says.
Will Peloton fire its CEO?
Currently, Peloton’s board of directors includes Foley, William Lynch, Erik Blachford, Karen Boon, John Callaghan, Jay Hoag, and Pamela Thomas-Graham.
The seven members, including Foley himself, will have to produce majority support to fire Foley from the company. It isn't clear how the current board feels about this move, but it’s possible that Blackwells will seek to usurp board positions in the next shareholder election. This would make a majority vote to fire Foley as the CEO much more likely. It would also increase the likelihood of a sale.
Whatever the case, the fact remains that PTON stock is down 82.48 percent in the 12 months ending Jan. 24. Blackwells argues that Peloton is worse off now than it was before the COVID-19 pandemic, despite the exercise company being a successful stay-at-home stock during pandemic lockdowns.