Peloton (PTON) Stock Gains on Report Activist Investor is Pushing for Management Changes, Potential Sale

January 24, 2022 5:34 AM EST

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Shares of Peloton (NASDAQ: PTON) are trading higher in pre-open Monday on media reports that activist investor Blackwells Capital asked the company to fire its CEO John Foley.

Activist investor's efforts to push for management changes at the exercise equipment company come after PTON shares fell over 80% from the high.

Blackwells Capital, which holds a nearly 5% stake in Peloton, is reportedly pushing the company’s board to dismiss Foley and explore sale options, according to Dow Jones.

Blackwells is pushing for a sale as the investor believes Peloton makes an appealing acquisition case for large companies such as Apple, Sony, Nike, and others.

Following the coronavirus outbreak, Peloton started providing stationary bikes and exercise equipment with live-streamed workouts featuring famous instructors, prompting the company’s stock to skyrocket during that period. However, shares of the New York City-based company plunged 84% in 2021.

The stock saw a near 24% drop on Thursday on the report that Peloton was temporarily pausing production due to weak demand. Following the report, Foley wrote in a letter that the company was considering making layoffs and resetting output levels in an effort to adapt to more seasonal demand.

In the letter, Foley said Peloton is “taking significant corrective actions to improve our profitability outlook and optimize our costs.”

In the preliminary Q2 earnings report, Peloton said revenue stood at $1.14 billion and that it ended the quarter with 2.77 million subscribers. This helped shares stage a recovery to close nearly 12% higher.

At the moment, Peloton’s market cap stands at around $8 billion, plummeting from $50 billion just a year ago.

Blackwells is accusing Foley, who is also a co-founder of Peloton, of making certain strategic errors such as manufacturing plans that have been one of the main reasons behind the stock’s significant drop.

In the letter, Foley also said that "layoffs would be the last lever (the company) would ever hope to pull but that it is evaluating the structure and size of the team and that it was "considering all options as part of our efforts to make our business more flexible."

Peloton stock initially traded over 3% higher in pre-market before paring gains to now trade 0.15% in the green.

By Senad Karaahmetovic | [email protected]

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