Peloton Interactive is falling to pieces, replacing its CEO as speculation about a merger continues to grow.
The company — which manufactures stationary exercise bikes through which users can complete virtual fitness classes — has witnessed a remarkable slowdown in demand since the COVID-19 lockdowns that originally presented new growth opportunities. Peloton will slash 2,800 jobs, representing 20% of its corporate workforce. Instructors will not be affected by the move.
Meanwhile, Peloton co-founder John Foley will end his decade-long tenure as CEO, instead assuming the role of executive chairman. He will be replaced by former Spotify CFO Barry McCarthy.
Peloton’s stock began the year at roughly $35; by the end of January, the price declined to $24. In recent days, however, the price has surged above $37 amid speculation over a buyout.
The change in leadership follows recent pressure from investors hoping for a merger, according to The Wall Street Journal:
A little over two weeks ago, activist investor Blackwells Capital LLC called for Peloton to fire Mr. Foley and explore a sale of the company, which the Journal has reported is attracting potential suitors including Amazon.com Inc.
Blackwells reiterated its call Tuesday, saying Mr. Foley should leave the company entirely rather than become executive chairman. Blackwells also released a 65-page presentation in which it estimated a sale could value Peloton above $65 a share. Peloton shares closed Monday at $29.75.
Many have pointed to Apple, Nike, and Amazon as potential suitors for Peloton.
“With media reports swirling that Peloton could be up for sale with Amazon and Nike potential suitors, we would be shocked if Apple is not aggressively involved in this potential deal process,” Wedbush Securities managing director Dan Ives wrote in an investor note shared with the New York Post. “Acquiring Peloton would be a major strategic coup and catalyze the company’s aggressive health and fitness initiatives.”
CNBC technology editor Steve Kovach, however, does not see an Apple buyout in the cards.
“Apple rarely makes large acquisitions. Peloton’s market cap was a bit more than $12 billion by Tuesday afternoon. Apple has never even come close to buying a company that large. Its largest acquisition to date was Beats for $3 billion,” he wrote. “Besides that, just about every other acquisition has been too small for Apple to meet the requirements to report them. We usually only find out about an Apple acquisition after someone in the press reports on it.”
“Apple is obsessed with making its own hardware and software, and keeping high profit margins,” he added. “Peloton makes giant Android tablets with clunky software, connected to exercise gear. Plus, Peloton continues to lose money and its margins would put a drag on Apple’s own margins if the two companies merged.”
As The Daily Wire revealed last year, Peloton employees were forced to undergo an “anti-racist” training that claimed common phrases such as “grandfathered in” are “white supremacist” terms.
The firm’s “Antiracism Activation Center” provided employees with resources on “global perspectives” on racism, “antiracism” strategies for allies, strategies for enacting systemic change, tools for creating race-related conversations at home — including “age-appropriate” resources for families — and a “Brave Conversation Speaker Series.”