Peloton confirmed that its co-founder and CEO, John Foley, will be leaving his position, as it plans some 2,800 layoffs and cancels plans for a new factory in Ohio.
A rising star of the pandemic, Peloton saw its valuation soar to $50 billion at its peak, only to have it sink back down to levels below its September 2019 IPO in recent weeks.
The drop led to a recent uptick in rumors that names like Amazon and Nike were exploring the possibility of acquiring the flagging company to build out their own health and wellness holdings. The reports aligned well with an earlier message sent to Peloton by investment firm Blackwells Capital calling for John Foley to be removed from his position and for the company to be sold off.
Now, it appears Blackwells has gotten part of their wish. Foley will officially step down from the CEO role but will remain executive chairman of the company he helped found. The new chief exec will be Barry McCarthy, a former chief financial officer for Spotify Technology and Netflix.
The new CEO told The Wall Street Journal that his strength lies in "a deep understanding of content-driven subscription models, while Mr. Foley's is in product development and marketing." Foley seemed to agree with the sentiment, saying, "I have always thought there has to be a better CEO for Peloton than me… Barry is more perfectly suited than anybody I could've imagined."
While the CEO may seem quite pleased with the move, the 20% of its workforce that Peloton announced will be laid off will likely feel differently. The 2,800 job cuts span its operations, sparing only its roster of instructors.
This is part of a larger slate of cost-cutting measures that also includes the cancellation of Peloton Output Park, a $400 million factory the company had planned to build in Ohio. This move will be joined by cutbacks to Peloton's delivery infrastructure and warehouse assets as well.
McCarthy blamed the massive pullback on the fact that Peloton "built out a cost structure as if Covid was the new normal" when speaking to WSJ.
Once again, Peloton's preliminary Q2 financial filings did nothing but more harm to its outlook. The company reported a net loss for the quarter of $439 million on a slumping revenue of $1.14 billion. This pushed its guidance for the full fiscal year down from $4.4 billion to $4.5 billion in expected revenue to just $3.7 billion to $3.8 billion.
Despite the turmoil, Peloton's share prices were once again up in early trading on Tuesday, reaching just under $35 by mid-morning as investors seemed to be hopeful that the planned cutbacks and new leadership would mean a return to the company's peak.
As for those rumors of a potential sale, The Wall Street Journal pointed to the fact that the appointment of a new CEO at this time would suggest Peloton is planning to go it alone for the foreseeable future. This is unlikely to sit well with Blackwells, who, according to WSJ, reiterated its stance on Tuesday that Foley should be removed from the company entirely.
The investment firm released a massive, 65-page presentation in which it claims to detail a plan which could bring in as much as $65 per share for the company, or double what it's been trading at in recent days.
It remains unclear if this plan, or any potential sale, will gain any traction with the company's shareholders or board.
In any case, Peloton plans to begin holding "separation conversations" with impacted staff as early as today. It noted that it will extend health coverage for the affected employees for an undisclosed "period of time" and extend their Peloton complimentary memberships for exactly 12 months.