Peloton chief to step down after activist campaign

Peloton’s co-founder and chief executive is stepping down after the value of the fitness bike maker has tumbled and it became subject to an activist investor campaign to clear out its directors.

Barry McCarthy, the former chief financial officer of Spotify and Netflix, will replace John Foley as chief executive and president and join Peloton’s board.

Foley, who has led the company since its foundation a decade ago, will become executive chair.

Peloton announced it will also cut about 2,800 jobs globally, reducing corporate positions by 20 per cent.

The company rode to popularity during the peak of the coronavirus pandemic when thousands of people used its signature stationary bikes and video classes during global lockdowns. But a slowdown in demand has hit the group, with its market value collapsing from nearly $50bn a year ago to less than $8bn last week.

The move comes as Blackwells Capital, which has a stake of nearly 5 per cent in Peloton, earlier on Tuesday stepped up its campaign against the under-fire fitness company by demanding a clear-out of directors and an investigation into possible misconduct.

The activist investor argued that Peloton had been “grossly mismanaged”, in a 65-page presentation to the company’s board ahead of Tuesday’s earnings announcement.

The analysis followed Blackwells’ critique of Peloton’s governance over a fortnight ago after the investor accused insiders of enriching themselves by selling more than $700mn of stock since its initial public offering in September 2019.

Blackwells recommended the board search for “new, fully independent directors with no prior ties to the current board and management team”. The company said it had formally demanded to inspect Peloton’s books and records to investigate the conduct of the company’s board and management.

Peloton did not immediately respond to a request for comment.

Over the weekend, it emerged that Nike and Amazon were separately evaluating bids to buy Peloton after Blackwells recommended the company look for a buyer. Other candidates are also likely to emerge, potentially including Apple and large private equity buyers, those briefed on the matter said.

Foley was considered a potential block to any deal, owing to the company’s dual-class shareholder structure, which gives them veto power on all big decisions.

The company’s total shareholder return of minus 76 per cent was the worst of any company in the Nasdaq 300 index in 2021, Blackwells noted, citing poor decision-making, lack of financial discipline, lack of credibility and qualifications, and misalignment of interests.

Peloton’s shares rose 21 per cent on Monday, still more than 80 per cent below the peak they reached in December 2020, amid news of potential takeovers.

In August, the group reduced the price of its flagship bike by 20 per cent to $1,495, reflecting slow growth as restrictions eased and gyms reopened.

When the company rushed out preliminary earnings almost three weeks ahead of schedule on January 20, it reported revenues of $1.14bn, in line with guidance of between $1.1bn and $1.2bn. Monthly churn — the number of subscribers leaving Peloton each month — was just 0.79 per cent, suggesting its millions of users remained enthused.