App sale

Peloton should put itself up for sale and fire its CEO, activist investor demands

Blackwells Capital, an activist investor that owns less than 5% of Peloton, says it has “serious concerns” about its performance and is asking its board to fire Foley immediately and explore a sale.

Blackwells Chief Investment Officer Jason Aintabi said the company is currently “in worse shape today than it was before the pandemic, with high fixed costs, excessive inventory, a listless strategy, discouraged employees and thousands of disgruntled shareholders”.

To turn things around for Peloton, Blackwells suggests firing Foley for his “repeated failures”, listing 10 examples. They include its pricing strategy (Peloton reduced the price of its bike and tread in August 2021, only to increase them again months later), its handling of the treadmill recall, and an alleged temporary shutdown of the production. Blackwells also criticized Foley for hiring his wife as a key executive.

“We believe that no counsel exercising reasonable judgment could leave Mr. Foley in charge of Peloton,” Aintabi wrote in the letter. Peloton has “become too big, too complex and too damaged for Mr. Foley to lead”, adding that Foley “should have enough self-awareness and enough self-interest to resign as director”.

A sale could help Peloton, Aintabi argued, explaining that a stand-alone company would not be “able to fully exploit the opportunities that its assets and brand enable”.

Platoon (PTON) declined to comment.

Many Wall Street analysts soured on the company. While 15 still have “buy” ratings on the stock, fourteen have a lukewarm “hold” on Peloton and two even have “sell” recommendations.

If Peloton were to explore a sale, it’s unclear who would be a best fit for Peloton. Apple (AAPL) is sometimes mentioned as a possible suitor, which might make sense given that the Apple Watch powers the company’s Apple Fitness+ app. Citron Research, led by famed short seller Andrew Left, thinks the meal kit company blue apron (APRN) might make sense as a Peloton merger.

— Hey, Peloton owners: are you still using your bike or tread? Tell us why or why not. And if the answer is no, do you plan to sell it? Please email your response to [email protected]