Peloton co-founder John Foley resigns after shares plummeted 90%

Peloton co-founder John Foley resigns and may sell his stake in the company after stock price plummeted 90% when pandemic restrictions loosened – and the company was stung by Sex and the City’s Mr. Big dying from a heart attack after a Peloton class

  • John Foley, 51, founded Peloton in 2012 and became a billionaire during the pandemic as millions began using his exercise bikes at home
  • He stepped down as CEO in February, as the company struggled amid a series of scandals, and on Monday resigned as executive chairman
  • Foley will be replaced by Karen Boone, a former executive at Restoration Hardware and a Peloton board member since 2019.
  • Peloton’s chief legal officer, Hisao Kushi, and chief commercial officer, Kevin Cornils, are also both resigning
  • Less than three weeks ago, on August 25, Peloton reported a $1.2 billion quarterly loss and a nearly 30 percent drop in revenue 

Peloton’s founder resigned from the company on Monday – less than three weeks after the exercise business he created, which saw him become a billionaire during the COVID-19 pandemic, reported a $1.2 billion quarterly loss and a nearly 30 percent drop in revenue.

John Foley, 51, launched the fitness firm in 2012, with the first studio in Manhattan in which instructors led classes that were also beamed into members’ homes.

It went public in September 2019, and the pandemic saw demand surge as gyms closed and millions begin to exercise in their homes.

But the surge in popularity was swiftly followed by a collapse in demand – not helped by scandals surrounding safety, with the recall of their treadmills after a child died, and bad publicity from a much-mocked Christmas advert, and Sex and the City’s male lead Mr. Big dying from a heart attack following a Peloton class.

A source told Yahoo Finance that Foley – who along with his wife and other insiders controls close to 60 percent of Peloton’s voting shares – may sell his stake in the company after a cooling-off period.  

Foley will be succeeded as board chair by Karen Boone, a former executive at Restoration Hardware and a Peloton board member since 2019.

Peloton founder John Foley, 51, resigned on Monday as the company struggles to cope with people exercising less at home post-pandemic

Sex and the City’s Mr. Big, played by Chris Noth, dies after having a heart attack following a Peloton class

The popularity of Peloton surged during the pandemic, but has dramatically declined in the months since COVID’s peak

Peloton’s two years of disasters

March 2021: Peloton warns parents to keep children away from its Tread+ treadmills after a six year old child is killed after being pulled underneath one of them

May 2021: Peloton recalls the running machines after reports of at least 72 other injuries emerge. Class action lawsuits against the company are filed

June 2021: Firm is accused of greed after disabling ‘Just Run’ feature on Tread+ which lets users run for free, instead forcing them to pay a $39 fee. Brought the free option back after an outcry

August 2021: Peloton slashes cost of its entry-level bike by $400 as revenue growth slows 

November 2021: Peloton reports sales of its products fell by 17 percent for the most recent quarter, with the smallest gain in subscribers since going public in September 2019. That saw Peloton’s market cap tumble by $8 billion, and John Foley lose his billionaire status 

December 2021: Mr Big – played by Chris Noth – dies of a heart attack after using a Peloton in the Sex and the City reboot And Just Like That. Shares continue to drop. Days later, Peloton is hailed for producing an advert featuring the revived character joking about the exercise bike. But it is forced to pull the hailed commercial after Noth is hit by multiple claims of sexual assault, which he denies 

Firm hit by fresh scandal after John Foley hosts lavish Christmas party for select employees, after annual bash was scrapped for rank-and-file staff 

Chris Noth, who plays Mr Big in Sex and the City, dies from a heart attack after using his Peloton

January 2022: Leaked audio reveals plans to fire 41% of sales and marketing teams. Stock price tumbles further after it emerged production of bikes and treadmills would be slowed due to sinking demand.

Calls for Foley to be fired emerge.

The PR gets even worse as another TV character is almost killed off from a heart attack after a Peloton session. Showtime’s popular series Billions used the bikes to give Mike Wagner, played by David Costabile, a scare in the season six premiere. He survives, and declared he is not going to die ‘like Mr Big’

Mike Wagner, played by David Costabile, is seen in the Season 6 premiere of Showtime’s Billions having a heart attack after riding a Peloton bike

February 2022: Executives at Peloton alleged to have hatched a plan to conceal rust and corrosion on their high-end bikes with a chemical solution.

When staff noticed that paint was flaking off some of the machines last year the company allegedly began using a chemical solution that disguised corrosion on the bikes by ‘reacting with the rust to form a black layer’, according to the Financial Times.

May 2022: Peloton’s stocks plummet nearly 90 percent over the past year, as company executives revealed that it lost a staggering $750 million in the previous quarter due to unsold inventory and mounting costs. 

The company lost $757.1 million for the three months of 2022, amounting to about $2.27 per share. And when stripping out nonrecurring items from the equation, a survey by Zacks Investment Research, it lost 98 cents per share – outpacing projections of a per-share loss of 85 cents. 

August 2022: Company announces it is slashing 784 jobs, increasing equipment prices, closing retail locations, and requiring employees to return to the office by November, as they try to secure their bottom line.

Peloton reports a huge $1.2billion loss, its sixth consecutive quarter of reported losses, sending shares tumbling 15 percent.

Peloton said its chief legal officer, Hisao Kushi, and chief commercial officer, Kevin Cornils, are also leaving.

Kushi will be replaced by Tammy Albarran, a deputy general counsel from Uber, but Cornils will not be replaced.

Barry McCarthy, Peloton’s CEO – a former finance executive at Spotify and Netflix, who took over the reins from Foley in February – thanked Foley for his work.

‘I would like to offer my gratitude to John and Hisao for their shared vision, dedication, and passion for Peloton,’ he said.

‘Through their hard work, they have given the world the connected fitness industry and created a platform that empowers each of us to be the best version of ourselves. We are indebted to them for their countless contributions.’

Foley said he was proud of the company he helped build.

‘As I reflect on the journey Peloton has been on since we founded it, I am so proud of what we have built together,’ he said.

‘We founded the company because we wanted to make fitness and wellness convenient, fun, and effective. Because of the work of thousands of people, we’ve done that.’

Peloton’s value surged during the pandemic, with shares at $160 – but today they are worth $11

The company’s value has dropped dramatically over the last year

He said he was embarking on ‘a new professional chapter.’

‘I have passion for building companies and creating great teams, and I am excited to do that again in a new space,’ he said.

He added that he was ‘leaving the company in good hands’ but would continue as a Peloton user – concluding: ‘I’ll see you on the leaderboard.’ 

On August 25, Peloton reported a $1.2 billion loss – its sixth consecutive  quarter of reported losses – which sent shares tumbling 15 percent.

Once a pandemic darling, Peloton has struggled with sinking demand for its products and services as people opt to head back to gyms instead of burning calories in their homes, as was the case during lockdowns.

Sales fell to $678.7 million from $936.9 million a year earlier.

‘The loss reflects the substantial progress we made this last quarter re-architecting the business to reduce the current and future inventory overhang, converting fixed to variable costs, and addressing numerous supply chain issues,’ said McCarthy, the CEO, in a letter to shareholders.

The move marks the latest measure by the fitness firm’s Chief Executive, Barry McCarthy (pictured), to expand its consumer base and increase cash flow

Embattled stationary bike seller Peloton has struck up a partnership with Amazon to sell its fitness equipment on the online retailer

The company’s exercise bikes – priced at above $1,400 – plus its treadmills and connected classes were all the rage among fitness enthusiasts during COVID-19 lockdowns.

But as gyms reopened following vaccinations demand nosedived.

In response, the company has tapped technology industry veterans as chief executive officer and chief financial officer. 

Since taking over in February, McCarthy has focused on cost cuts through layoffs and store closures, outsourcing manufacturing and slimmer inventories.

‘I think Q4 will have been the high water mark for write-offs and restructuring charges related to inventory and supply chain issues and the beginning of the comeback story for Peloton,’ McCarthy said in his letter.

Excluded from the association with Amazon, however, are some of the sellers more premium products, such as its Bike+ machine (at left), which starts at $2,495, and its even more pricey Tread treadmill, which costs at least $3,495 

The day before the terrible results were announced, the embattled bike seller struck up a partnership with Amazon to claw back lost profits.

The move marked the fitness giant’s first foray into third-party selling after maintaining a direct-to-consumer model for the past decade.

Meanwhile, management told employees this month they are slashing 784 jobs, increasing equipment prices, closing retail locations, and requiring employees to return to the office by November, as they try to secure their bottom line.

‘We have to make our revenues stop shrinking and start growing again,’ McCarthy told staff.

‘Cash is oxygen. Oxygen is life.’

He added he hopes the decisions will ‘better position the company for long-term success.’ 

Source: Read Full Article