Peloton Interactive (PTON) shares moved modestly higher Monday amid reports that activist investors at Blackwells Capital LLC called for the firing of CEO John Foley, and the potential sale of the fitness equipment maker, following last week's multi-billion sell-off.
The Wall Street Journal first reported that Blackwells Capital, which is managed by star investor Jason Aintabi, is pressing for immediate changes at Peloton and blaming Foley for a series of mis-steps that culminated with a CNBC report on Thursday suggesting it was preparing to halt bike and treadmill production amid a 'significant' pullback in customer demand.
CEO John Foley called the CNBC report, which cited an internal memo, "false", but noted the group will nonetheless "reset" output levels and review the size of its workforce and take "significant corrective actions" to improve profits.
Reuters reported that Blackwells is urging Peloton to explore a sale to companies such as Nike (NKE), Apple (AAPL) or Disney (DIS).
"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," Blackwells said in a letter to Peloton that was viewed by TheStreet. "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."
"Remarkably, the Company is on worse footing today than it was prior to the pandemic, with high fixed costs, excessive inventory, a listless strategy, dispirited employees and thousands of disgruntled shareholders," the letter added. "And no wonder, the latter, given that Peloton underperformed every other company in the Nasdaq 100 over the last twelve months.
Peloton shares closed 9.8% higher Monday to end the session at $29.71 each in a move that trims the stock's one month slump to around 19%.
Peloton posted a net loss of $376 million for its fiscal first quarter, which ended in September, amid the slowest sales growth in more than a year and said 2022 revenues would likely come in between $4.4 billion and $4.8 billion, a $1 billion reduction from its prior forecast.
Adding to its demand woes, Peloton said the $400 price cut to its signature bike, rising freight costs and supply chain disruptions -- as well as costs linked to its treadmill recall -- would squeeze profit margins for the remainder of its fiscal year.
Peloton shares from its Nasdaq 100, the Nasdaq Equal Weight Index and Nasdaq ex-Technology Index benchmarks following a year in which the stock lost more than 70% of its value.
The changes are set to take place on January 24. Peloton will publish its December quarter earnings on February 8.
