The activist investor attacking Peloton (PTON) isn’t going away quietly despite Tuesday’s announcement of major management changes and cost cuts.
“Peloton CEO John Foley naming himself Executive Chairman and hiring a new CFO does not address any of Peloton investors’ concerns. Mr. 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 today,” Blackwells Chief Investment Officer Jason Aintabi said in a new letter Tuesday obtained by Yahoo Finance.
Peloton didn’t return Yahoo Finance’s request for comment on the letter.
As Yahoo Finance previously reported, Blackwells owns about a 5% stake in Peloton. Aintabi shredded Peloton in a letter last month, demanding Foley be ousted. That is now the case.
The company said it will appoint Barry McCarthy as CEO, replacing founder and CEO John Foley who will move into the executive chairman role the company disclosed. Peloton will also slash 2,800 jobs as it seeks to better align costs with slowing demand for its connected bikes.
Peloton said it aims to achieve $800 million in cost savings while also slashing capital expenditures by $150 million in 2022.
“As a team with a culture as close and tight-knit as ours, saying goodbye to teammates at any level is hard. We aspire to be the best place to work and we know that doesn’t only mean making Peloton a great place to be at, but it also means ensuring Peloton is a place you are proud to be from. And, while today is one of the more challenging ones in our history, we are doing everything we can to ensure you can remain proud of what we have done together,” Foley said in a letter to employees.
McCarthy, 69, is known on Wall Street circles as the innovative architect of Spotify’s 2018 direct listing. At Spotify, he was CFO for several years before retiring in 2019. He is seen as having a major passion for the numbers, in part reflecting his long-time serving as Netflix CFO. McCarthy has also been a board member of delivery startup Instacart for over a year.
A person familiar with McCarthy’s time at Spotify tells Yahoo Finance, McCarthy has extensive knowledge of subscription-based business models (which Peloton has), but respects the need to spend on content.
McCarthy’s résumé and stature suggests Peloton isn’t interested in selling itself, at least not until McCarthy fixes the company’s finances and could fetch a better valuation than currently depressed levels.
Blackwells’ Aintabi aims to keep the pressure on Peloton.
The activist firm disclosed it exercised its rights Monday to review the books and records of Peloton. The letter says the request was made to the company pursuant to Section 220 of the Delaware General Corporation Law.
“Blackwells intends to determine whether the lack of effective oversight at the Company was the direct result of the Company’s dual-class share structure, which may have precluded independent directors from exercising their fiduciary duties to the Company’s Class A common stockholders,” the letter says.
In a new 65-page presentation, the activist says Peloton could be worth $65 to $75 a share. The stock currently trades at $30.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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