Earlier this week, one of Peloton’s leading investors, Blackwells Capital LLC, urged the fitness tech company to sack its co-founder and chief executive John Foley. The move came after the company’s share price plummeted by over 20%, following a leaked report which suggested it had halted production on its popular exercise bikes amid drooping demand.
This latest news is a far cry from where the company found itself in January 2021, as it watched its share price close at an all-time high of $167. Fast-forward 11 months and the company reached a historic $49.3 billion in December 2020, with a 172% spike in sales over the course of the year.
Today, you can pick up Peleton stock for less than its IPO price of £29, a dramatic fall of 85%. The company is currently valued at around $9.71 billion, a staggering loss of $40 billion across a period of only 13 months. If you’d bought £1,000 worth of stock during its peak, your investment would now be worth a measly £159.
So where has it gone wrong for the tech company, which at one point was being hailed as one of the winners of the pandemic? With product controversies, bad PR, leaked internal disputes and a number of lawsuits under its belt, Peloton has gone from the cream of the crop to attempting to repair its damaged reputation and investor confidence.
Founded in 2011 by bookstore executive John Foley, Peleton’s concept was that working professionals should be able to achieve a high-end studio cycling class from the comfort of their own homes.
The company changed its name to Peloton Interactive in 2012 and managed to raise $3.9 million in seed money the same year, before selling its first ever bike on Kickstarter in 2013. The bike was sold for an early-bird price tag of $1,500.
The company’s flagship (and since controversial) Tread+ was debuted at the annual Consumer Electronics Show in Las Vegas in January 2018.
Peleton then experienced its first major controversy in March 2019 after it was sued by the National Music Publishers Association for using copyrighted music in their videos without the necessary legal synchronisation licenses.
Peloton CEO John Foley
The association sought $150 million in damages and Peloton responded by changing the music it used in its online classes. However users then criticised the company for changing the music, saying it affected the product experience.
In September 2019, the suit was amended and increased to double the initial amount, prompting Peloton to settle with an undisclosed amount.
Foley did not let that small bump hinder his ambitions of giving consumers what he believed to be a revolutionary new idea. The company went public in 2019, raising $1.16 billion and putting Peloton up there with the fitness tech industry’s more respected names.
However, it wasn’t until the pandemic forced gyms to close their doors that Peloton really made serious gains across both its finances and consumer base. Home gyms became the norm and people rushed to improve their personal fitness in case of a Covid-19 diagnosis.
The athleisure industry boomed by over 80% over the early stages of the pandemic, further stocking the Peloton coffers much to the delight of the company’s investors and John Foley, who had seen his company’s stock boom over the past six months.
The first fly in the ointment came in spring 2021 as a number of reports of injuries surfaced on the internet, including footage of a child and one shocking fatality involving a six-year-old child.
In addition to the fatality, the company also had 72 reports of injuries such as broken bones, cuts and grazes, 39 of which involved the Tread+.
The US Consumer Product Safety Commission (CPSC) said the machine posed “serious risks to children for abrasions, fractures, and death” but has limited powers and usually relies on brands to recall their own products after warnings.
Peloton responded to the CPSC’s warning, calling it “inaccurate and misleading”.
“Like all motorised exercise equipment, the Tread+ can pose hazards if the warnings and safety instructions are not followed,” the company said in a statement. It advised owners of the machine not to let anyone under the age of 16 use the product and to keep children and pets away from the Tread+.
READ MORE: Peloton investor calls for fitness tech company to sack its CEO
Foley emailed Peloton customers: “We design and build all of our products with safety in mind In order to help ensure that you and your family members stay safe with Peloton products in your home, we need your help.”
It wasn’t until the following month and two lawsuits later that Peloton issued a formal recall of the Tread+, promptly wiping off $4 billion of the company’s market valuation.
Foley said the firm had “made a mistake” in not recalling the machines sooner.
“I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+,” he said.
Peloton then managed to anger its consumer base by removing the free “Just Run” feature on its $4,000 Tread+, meaning that in order to use the treadmill, customers had to subscribe to the company’s $39 pcm membership.
A public dispute with athleisure rival Lululemon followed, with the sportswear firm accusing Peloton of infringing its design patents for a new line of clothing.
The two sports companies initially had a partnership with each other in 2016, to “benefit from the popularity of Lululemon’s products and designs”.
Lululemon claimed that it “supplied Peloton with some of Lululemon’s most innovative and popular athletic apparel”, allowing the New York firm to add its own trademarks and resell the co-branded apparel through its retail outlets.
READ MORE: Lululemon warns of slowdown in athleisure sales amid Omircon variant
A number of internal disputes and leaks have also shaken the company to its core. In November, black Peloton employees complained about being paid less than the industry standard for their positions and experience.
Workers in a company Slack channel called “blackatpeloton” shared salaries of $45,000 to $57,000.
The company said it evaluates its pay annually, including cash and equity for its full-time employees, according to a report from Business Insider at the time. However the concerns raised by staff were reportedly aired for weeks in the company’s internal Slack channel.
The payment scandal was then joined by an embarrassing audio leak in which company executives were heard discussing laying off 41% of its sales and marketing teams, starting with “stripping out low performers” in ecommerce.
Blackwells call for John Foley to be ousted and the company to consider selling itself to one of Disney, Apple, Sony or Nike has been the final nail in the coffin of an incredibly turbulent year and a half for Peloton, as it rose to the summit, establishing itself as a serious player before crumbling spectacularly. Whether Foley leaves the company he founded 11 years ago or finds a way to navigate the new landscape remains to be seen.
