New Peloton CEO’s first company-wide virtual meeting is cut short after fired staff hijacked it and bombarded the chat with angry messages, including one who wrote ‘I’m selling all my Peloton apparel to pay my bills!!!’
A virtual, company-wide meeting meant to introduce new Peloton CEO Barry McCarthy descended into chaos on Wednesday as some of the 2,800 employees who were abruptly laid off the day before took out their frustrations in the chat box.
‘I’m selling all my Peloton apparel to pay my bills!!!,’ one person wrote.
On Tuesday, the company announced it was replacing CEO and co-founder John Foley and slashing 2,800 jobs in a desperate bid to cut costs and revive the struggling exercise company.
Some of the laid off employees – who make up 20 percent of global corporate staff – reportedly learned they were fired when they found their access to the company’s Slack channel switched off Tuesday morning.
In a memo, Foley said that the axed employees would get 12 months of free fitness classes as part of their severance packages, a value of about $468.
‘This is awfully tone deaf,’ wrote one user who sneaked into Wednesday’s meeting.
‘The company messed up by allowing people who were fired into this chat,’ another user said. ‘Too late to mod [moderate] this.’
It’s unclear how the recently fired staff gained access to the meeting, which was cut short amid the drama, according to CNBC.
A virtual meeting meant to introduce new Peloton CEO Barry McCarthy descended into chaos on Wednesday after fired staff hijacked it. Above, McCarthy at Spotify Investor Day in 2018
Some of the 2,800 employees who were abruptly fired the day before fired off angry messages like: ‘I’m selling all my Peloton apparel to pay my bills!!!,’ CNBC reports
Peloton’s share price has risen after the announcement, going from $31.64 Tuesday morning to $38.77 at closing on Wednesday
McCarthy (right in Sun Valley, Idaho in July 2018) is a former CEO at Netflix and Spotify
McCarthy, the new CEO who previously led Spotify and Netflix, briefly addressed the disorder after he was asked if any workers who were let go had gained access to the meeting.
‘No comment,’ he said.
John Foley, 51, founded Peloton in New York City in January 2012.
He resigned as CEO on Tuesday, but appointed himself executive chairman, and new CEO Barry McCarthy told staff in an email that Foley won’t be ‘scaling back his involvement with Peloton,’ the New York Post reported.
‘I plan on leveraging every ounce of John’s superpowers as a product, content, and marketing visionary to help make Peloton a success as my partner,’ McCarthy wrote in the memo.
Peloton’s share price has risen after the announcement, going from $31.64 Tuesday morning to $38.77 at closing on Wednesday.
McCarthy’s email seems to clarify that Foley will still have an active hand at the company as executive chair, an outcome that activist investors who had pushed for Foley’s ouster feared, blaming him for the company’s valuation tanking nearly 80 percent in the past year.
In a memo, Foley said that the axed employees would get 12 months of free fitness classes as part of their severance packages, a value of about $468, according to the Post.
Although the severance packages will also include extended health benefits and other undisclosed remuneration, the inclusion of the free class drew blowback and struck some observers at tacky.
The company expects to spend about $130 million in total cash on severance packages as part of the restructuring, as well as $80 million in non-cash charges
Peloton on Tuesday announced sweeping restructuring moves, including global layoffs of 2,800 employees, 20 percent of the company’s workforce.
Amid the flurry of cost-cutting moves, the company said it is shutting down plans for a $400 million factory in Ohio.
New Peloton CEO Barry McCarthy (left) told staff in an email that Foley (right) won’t be ‘scaling back his involvement with Peloton’ despite resigning as CEO
Activist investors has accused Foley of ‘repeated failures’ including hiring his wife Jill (with him above) as vice president of apparel
Peloton said that it is ‘winding down the development of its Peloton Output Park (POP) manufacturing plan’ including the factory under construction (above) in Luckey, Ohio
The troubled company said that it is ‘winding down the development of its Peloton Output Park (POP) manufacturing plan’ including the factory under construction in Luckey, Ohio.
Peloton said in a filing that it had already spent $30 million to build the facility, and expected to sink a further $60 million to wrap up construction before selling the property at an expected loss.
Activist investors has accused Foley of ‘repeated failures,’ including hiring his wife Jill as vice president of apparel.
The couple had soared high during Peloton’s pandemic sales surge, and were featured in a flattering New York Times profile in late 2020, which depicted Foley lugging firewood to his West Village townhouse, where he kept a Peloton treadmill in his basement bathroom.
But the company’s reversals brought Foley, as well as his wife, under harsh scrutiny.
In a conference call with analysts on Tuesday, Foley acknowledged that the company expanded its operations too quickly and overinvested in certain areas of the business.
‘We own it. I own it, and we are holding ourselves accountable,’ said Foley, noting he will be working closely with the new CEO. ‘That starts today.’
Peloton’s shares surged about 25 percent Tuesday, despite the company reducing its annual outlook for sales and subscriptions and reporting a big loss for its fiscal second quarter.
Shares were down 3 percent midday on Wednesday in choppy trading.
Peloton’s shares surged about 25 percent Tuesday, but sank around 3 percent Wednesday
Amid the flurry of cost-cutting moves, the company said it is shutting down plans for a $400 million factory (above) in Ohio
Foley founded Peloton in New York City in January 2012. Above, one of the company’s exercise bikes in Luckey, Ohio in August 2021
Peloton has been on a wild ride for the past two years during the pandemic.
Company shares surged more than 400 percent in 2020 amid COVID-19 lockdowns that made its bikes and treadmills popular among customers who pay a fee to participate in Peloton’s interactive workouts.
But nearly all of those gains were wiped out last year as the distribution of vaccines sent many people out of there homes and back into gyms.
Peloton’s initial success also created competition, with companies peeling away customers by selling cheaper bicycles and exercise equipment.
High-end gyms also jumped into the game, offering virtual classes that once were Peloton´s biggest draws. All the while, Peloton misjudged the slowing demand and kept churning out its products.
‘The problem for Peloton isn’t that it has a bad product. Nor is it that there is no demand for what it sells,’ said Neil Saunders, managing director of GlobalData Retail in a note published Tuesday.
‘The central problem is one of hubris and bad judgment. Peloton incorrectly assumed that the demand created by the pandemic would continue to curve upward.’
Foley has drawn the ire of activist investor Blackwells Capital in recent months as the company struggled to maintain the breakneck growth that propelled its valuation to $52 billion in early 2021. Shares have since tumbled nearly 80 percent.
The investment firm called for his removal and even urged the company to sell itself, blaming the stock’s underperformance to ‘gross mismanagement,’ Foley’s poor decision making and a lack of credibility.
Jason Aintabi, Blackwells’ chief investment officer, accused Foley of ‘repeated failures’ including hiring his wife as vice president of apparel.
Jason Aintabi (above), Blackwells’ chief investment officer, accused outgoing CEO John Foley of ‘repeated failures’ including hiring his wife as vice president of apparel
Outgoing CEO John Foley co-founded Peloton with his wife Jill Foley (with him above) but some activist investors questioned her appointment as an executive at the company
Blackwells, however, said Tuesday’s moves did not address investors’ concerns.
‘Foley has proven he is not suited to lead Peloton, whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done (on Tuesday),’ said Aintabi.
Peloton also said on Tuesday that it appointed two new directors, Angel Mendez and Jonathan Mildenhall, to its board.
Mendez runs a private AI company for supply-chain management, and Mildenhall is the former chief marketing officer for AirBNB.
Erik Blachford, who has served as a director since 2015, will step down.
Peloton on Tuesday also slashed its forecast full-year revenue expectations after it reported a bigger-than-expected quarterly loss.
As part of the cost-cutting process, Peloton hopes to save $800 million and reduce capital expenditures by $150 million this year.
Meanwhile, the Financial Times reported late on Friday that Nike is also evaluating a bid for Peloton, citing people briefed on the matter, who said the considerations are preliminary and Nike has not held talks with Peloton.
Its quarterly revenue has been steadily dropping in recent months due to slumped demand. Although the company references its latest time frame as first quarter 2022, its earnings for that period were released last November
There are also other potential unnamed suitors interested in purchasing the exercise equipment company – although there is no imminent deal on the horizon.
The deal would make sense for Amazon, which could have multiple potential ties between Peloton and their already existing businesses, WSJ reported.
Amazon’s fleet-and-logistics arm could help with Peloton’s supply-chain issues and a Peloton subscription could potentially be bundled with Amazon Prime, which offers users waived shipping costs, a streaming service and more for a monthly or annual fee, WSJ reported.
The fitness giant has sought help from consulting group McKinsey & Co. to get its finances in order after it slashed its future earnings outlook for 2022 by $1 billion last November, down to between $4.4 billion and $4.8 billion.
Days later the company’s share prices plummeted 27 percent to $24.22, a two-year low.
The huge dip came after a leaked presentation revealed that the company has seen a ‘significant reduction’ in demand for its products.
The report, first seen by CNBC, said the company planned to temporarily pause bike production in February and March and will not manufacture the Tread treadmill machine for six weeks, beginning in February.
Mr. Big was killed off in the premiere episode of the Sex and the City reboot, And Just Like That, after suffering a heart attack following a workout on a Peloton bike
It was reported that the company is not looking to produce any Tread+ machines in fiscal year 2022 and has thousands of cycles and treadmills lying in warehouses or on cargo ships.
In May last year, the company was forced to recall 125,000 treadmills following reports of multiple injuries and the death of a child in an accident. U.S. regulators are investigating the company over the injuries.
Peloton received 72 additional complaints of adults, kids and pets being pulled under the back of the treadmill, resulting in 29 injuries, the Consumer Product Safety Commission (CPSC) said.
The safety agency also released a video that showed how a person could become trapped by the device.
In November, it slashed its full-year outlook by up to $1billion with analysts warning that a tough path was ahead.
Peloton also suffered from bad publicity from an episode of the Sex and the City reboot And Just Like That, which suggested the company’s exercise bikes could be lethal.
Carrie Bradshaw’s husband, Mr. Big, slumped to the ground moments after wrapping up a cycle session with his favorite instructor. He died of a heart attack in the episode.
Peloton later retorted that its equipment did not contribute to the fictional character’s death, which it blamed on his cigar-smoking and unhealthy diet.
Peloton then responded with a parody ad of its own, but retracted the ad after actor Chris Noth, who plays Mr. Big, was accused of sexual assault.
Activist investor says Peloton’s CEO shake-up isn’t enough to satisfy its concerns
Jason Aintabi, Blackwells’ chief investment officer, campaigned for Foley’s removal
The activist investment firm pushing for a sale of Peloton on Tuesday said plans to replace the fitness company’s chief executive are not enough and that the board must still pursue strategic alternatives to benefit all shareholders.
Blackwells Capital, which owns a nearly 5 percent stake of Peloton, reacted to news that New York-based Peloton’s founder, John Foley, was shifting positions to executive chairman and that a former Spotify Technology executive would replace him as chief executive.
The move ‘does not address any of Peloton investors’ concerns,’ Jason Aintabi, Blackwells’ chief investment officer wrote in a statement, adding: ‘Foley has proven he is not suited to lead Peloton, whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done’ on Tuesday.
Blackwells on Monday sent Peloton a 65-page presentation, saying the company known for its exercise equipment such as stationary bikes and its on-demand fitness classes has been ‘grossly mismanaged.’
The presentation said potential buyers should be able to pay at least $65 while strategic buyers could easily pay $75 a share.
Blackwells said companies ranging from Adidas to Amazon to Oracle and Sony could be potential strategic buyers of Peloton.
Blackwells accused Foley of managing with ‘unbridled optimism rather than discipline’ and blamed him for bloated costs, poor decision making and poor capital allocation. The company’s share price dropped 76% last year.
Peloton became a market darling during the COVID-19 pandemic as gyms were closed and its market capitalization surged to $50 billion before tumbling to $9.7 billion. The company’s share price surged in the wake of reports that some companies, including Amazon, were discussing making an overture to the company.
While many investors had become frustrated with Peloton as the stock price fell, analysts also noted that the company might be difficult to target because it has two classes of stock, effectively allowing insiders to control it.
Blackwells has also issued a request to review the company’s books and records to see whether the company’s dual-class share structure may have contributed to a lack of oversight.