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Peloton activist Blackwells takes aim at new CEO, pushes for sale

Peloton activist Blackwells takes aim at new CEO, pushes for sale

A person walks past a Peloton store on January 20, 2022 in Coral Gables, Florida.

Joe Riddell | Getty Images

Activist Blackwells Capital is repeating its push for Peloton to consider the sale, arguing that the connected fitness company has made little or no progress under new CEO Barry McCarthy, according to a new presentation seen by CNBC.

Peloton’s strong brand, proprietary technology, engagement of fitness coaches and a loyal subscriber base could be molded into a more attractive business, says Blackwells, which has a less than 5% stake in Peloton.

But the company said change cannot effectively happen in public markets, especially since Peloton founder and former CEO John Foley retains control of the company with his super-voting stock.

On Wednesday, Peloton shares closed 5.5 percent higher. Inventory is down 30% since the start of the year.

This comes just over two months after Foley transitioned into CEO role and McCarthy, a former Netflix and Spotify executive, took over Peloton. The jolt came when Peloton was seeing demand for its bikes and treadmills dwindle as costs rose, affecting profits. In February, Peloton announced plans to cut about 2,800 jobs and cut nearly $800 million in annual costs.

“Two months have passed since John Foley was promoted to CEO and Barry McCarthy came out of retirement to take over as CEO,” Jason Aintabi, chief investment officer at Blackwells, said in a statement. “It is remarkable that shareholders are now worse off than before.”

Blackwells called on Foley to “recognize his limitations,” Entebbe said, and immediately eliminate the two-tier voting structure.

“Blackwells continues to believe that Peloton cannot be controlled by a CEO who appears to be under severe duress, and will pursue all solutions available to him and all shareholders,” he added.

The Financial Times first reported on the Blackwells show.

Peloton and Foley did not immediately respond to CNBC’s request for comment.

Blackwells first targeted Peloton in late January, after a series of CNBC reports, including a report that the company had hired consultancy McKinsey & Co. to look for cost-cutting opportunities across the company and Peloton’s latest plans to temporarily halt production of some. Products with low demand.

At the time, Blackwells argued that Peloton could be an attractive acquisition target for larger tech or fitness-focused companies, such as Apple or Nike.

Since taking the top job, McCarthy has been clear about his plans to turn the company around rather than pursue a short-term sale. In an email sent across the company in early February, he said he was “here for the comeback story.”

Under his leadership, Peloton has already appointed a new head of supply chain and is also testing a new pricing system, where customers pay a single monthly fee for both their exercise equipment and access to on-demand fitness classes. McCarthy’s background with membership-based companies has fueled speculation that the CEO could shift Peloton to focus more on recurring subscription revenue over hardware sales.

However, Blackwells argues that a more significant restructuring is necessary and that Peloton’s cost-cutting measures will not achieve enough.

In his presentation, the activist said, Peloton could get an acquisition price now that could take years to achieve as a stand-alone company. It lists Netflix, Google, and Amazon as potential acquirers.

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