Peloton is again under pressure from activist investor Blackwells Capital LLC, which owns nearly 5 percent of the company and in January urged Peloton Interactive co-founder and CEO John Foley to resign. Blackwells released a presentation on April 12 stating that “two months since Peloton hired one of the highest-paid CEOs in all of corporate America, nothing has fundamentally changed” and that transforming the company’s platforms, trainers and subscriber base into a more efficient model “cannot happen effectively in the public markets, especially with the current leadership in place.” In February, Foley stepped down as CEO and was replaced by Barry McCarthy, a former chief financial officer for Netflix and Spotify. The investor is now urging the company to transform into an asset-light, software-based company and sell to a major technology or multimedia group or another company successful in the subscription business or in connected fitness and with global reach.
Blackwells charges that, after the wiping out of “$30 billion in shareholder value last year,” investors don’t have “the patience or confidence in the Board’s ability to effectively execute a multi-year business-wide transformation strategy.” The company would need to more than double its revenue over the trailing 12 months of operations and increase subscribers about six-fold to organically reach the $75 per share it would be worth if sold. Potential buyers suggested by Blackwells include Amazon, Apple, Google, Warner Bros, Netflix and Nike.
Blackwells outlined a four-pillar approach to what it calls a “fitness-as-a-service model” with higher margins and return on investment: outsourcing all manufacturing and focusing capital on software-centric projects; creating a centralized platform for all Peloton hardware and software along with third-party health products and services; becoming “the leading fitness-focused social network in the world” and matching “highly regarded Peloton instructors to metaverse-interconnected fitness programs”; and leveraging data from Peloton-owned devices and third-party wearables to create personalized marketing and demographic-based pricing models.
In its presentation, Blackwells also projected that the global treadmill market would grow from $3.2 billion in 2020 to nearly $6 billion in the 2030s. The new model would open Peloton to commercial gyms and workout spaces in school, office and hospitality settings. The investor estimates that if the fitness-as-a-service model could reach just 2 percent of active adults in high-income countries, the number of subscribers would increase six-fold. A similar projected increase in social media could bring Peloton Digital an additional $155 million in annual subscription revenue.
