Shares of Peloton Interactive Inc (NASDAQ: PTON) jumped more than 10% on Monday after Blackwells Capital sought to oust CEO John Foley and said the fitness products company should consider a sale to boost its stock price.
Peloton could be an attractive target for acquisition
According to the activist investor, Peloton is an appealing target for acquisition at current valuation, especially for giants like Apple, Nike, Disney, Sony etc., which could expand their footprint in health and wellness through Peloton.
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PTON touched a high of over $160 in December 2020 versus under $25 last week that was below its IPO price of $29 a share, which Blackwells sees as a massive failure of CEO Foley. In a letter to Peloton’s board, the activist investor wrote:
Foley misled investors that Peloton did not need additional capital just weeks before issuing $1.0 billion of equity. He has repeatedly failed to forecast consumer demand, churn, and product returns – to the point of removing related metrics from the Company’s public guidance.
Other reasons why Blackwells is calling for extreme measures
Blackwells is also disappointed in Peloton’s pricing and manufacturing strategy. Low internal morale was among other reasons why it’s calling for such extreme measures to improve shareholder returns.
We believe no Board exercising reasonable judgment could leave Mr Foley in charge of Peloton. The Company has gotten too big, too complex and too damaged for him to lead it. And he should have enough self-awareness and enough self-interest to resign as a director.
The news comes only days after Peloton said it was “right-sizing” its inventory to match the post-pandemic demand. It is also looking for ways to cut costs that might lead to layoffs. Peloton also had another PR crisis over the weekend.
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