According to SEC filings, insiders and executives reportedly sold $496 million in stock, while the company’s CEO says the company is taking “significant corrective action.”
This article is free of opinion and bias, and is based solely on statistics and accredited media reports. All listed facts within this article are fully-attributed to several economic experts and media outlets, including Forbes.com, Gizmondo.com, CNN.com, TechCrunch.com, WKYC.com, PR Newswire, Peloton CEO John Foley, and Wikipedia.
Shares of Peloton, the exercise bike and treadmill manufacturer that became one of the nation’s most popular exercise companies during the onset of the Covid-19 pandemic, with a stock increase of nearly 400% in 2020, has seen its stock fall 85% from its heyday. See here for Forbes.com article, published October 15, 2020 and written by Jonathan Ponciano, entitled, “Peloton Has Soared 350% In 2020. Here’s Why The Stock Will Keep Rising This Year, According To Experts.”
Those experts, reportedly, were not entirely correct.
Since Peloton’s 2020 glory days, the company has paused production on some of its lesser-selling models, and are now considering cutting jobs.
What happened? How does a company become among the biggest of all exercise manufacturers and retailers in such short order, and even more quickly face such economic difficulties?
This article will explore the answers to those questions, which collectively represents a veritable cautionary tale for a world striving to return to a state of pre-pandemic normalcy.
The State of the Company
On September 26, 2019, Peloton’s initial public offering was announced as raising $1.2 billion. See here for TechCrunch.com article, written by Kate Clark, entitled “We are Seeing Volume and Interest in Peloton Explode,’ Says Company President on Listing Day.”
From the article: This morning, Peloton (NASDAQ: PTON), the tech-enabled stationary bicycle and fitness content streaming company, raised $1.2 billion in its NASDAQ initial public offering. Despite dropping more than 10% in its first day of trading — ultimately closing down 11% at $25.84 per share — the IPO was a bona fide success. Peloton, once denied (over and over again) by VC skeptics, now has hundreds of millions of dollars to take its business into a new era. One in which, the media, hardware, software, logistics and social company attempts to become a generation-defining company akin to Apple.
Years passed, and the company steadily grew until peaking in 2020. Public optimism for the brand, however, diminished throughout 2021, and in January of 2022 encountered its greatest challenge when CNN and news sources throughout the country repeatedly reported on the imminent demise of the once powerful brand.
See the following three CNN reports, as representative of recent newsworthy stock plunges:
- Charles Riley says, “The Pandemic Boom is Over. Just Ask Peloton and Netflix.” See Riley’s article here.
- CNN Business does a deeper dive, in the article entitled “Peloton May Consider Cutting Jobs and ‘Resetting’ Production,” by Jordan Valinksy. See here.
- CNN Business returns to the well, in Paul R. La Monica’s “Peloton May be Toast.” See here.
In response to the negative press, Peloton Co-Founder and CEO John Foley posted the following letter on the company website, OnePeloton.com, to subscribers and patrons here.
From Foley’s letter, dated January 20, 2022: We have always done our best to share news with you all first, before sharing with the public. This week, 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. Before I go on, I want all of you to know that we have identified a leaker, and we are moving forward with the appropriate legal action. But moving forward, I want to take a moment to talk about some of the changes with you directly.
The letter goes on to claim the company is undergoing strategic reconsiderations of some of its present business model. A press release from PR Newswire was also released on January 20, 2022, also quoting Foley, in which he states (as excerpted in this article’s subtitle): “As we discussed last quarter, we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company. This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward. This work is still underway and we expect to have more details to share when we report earnings on February 8, 2022.”
The reports, however, have continued to predict the imminent end of the iconic brand.
For a brief history of the Peloton brand, click here for Wikipedia entry, which states: Peloton Interactive, Inc. is an American exercise and media company based in New York City. Peloton's main products are internet-connected stationary bicycles and treadmills that enable monthly subscribers to remotely participate in classes via streaming media. Peloton charges a $39 monthly membership fee to access classes and additional features on their exercise equipment, or $12.99 for users only accessing the content via app or website.
Like most major companies, especially those that have experienced substantial stock increases during the pandemic, Peloton has experienced great heights and, presently, challenging lows.
Time will tell if the brand will survive 2022. What is clear is that Foley will continue to confront what he considers misleading media reports, while remaining the pubic face of the company’s financial record.
Thank you for reading.