(Recasts with stock price surge, adds details from letter,
analyst note, background on Peloton and Blackwells)
Jan 24 (Reuters) - Peloton Interactive Inc's stock
surged on Monday after investment firm Blackwells Capital urged
the exercise equipment maker's board to fire its chief executive
and put the company up for sale.
The company's shares climbed nearly 10% to close trading at
$29.71 after having dropped 3.4% in premarket trading on a day
the broader market fell before staging a late-day turnaround.
Peloton, which initially became a market darling during the
pandemic as people flocked to its bikes, treadmills and popular
streamed workouts, is now on worse footing than two years ago,
It urged the board to remove CEO John Foley immediately,
accusing him of creating an atmosphere of high fixed costs and
holding on to excessive inventory while also misleading
investors about the need to raise capital.
Foley must be held "accountable for his repeated failures"
and "should be fired as CEO, immediately," Blackwells founder
Jason Aintabi wrote in the letter which was made public on
Peloton did not respond to a Reuters request for comment.
Blackwells is also urging the board to put the company up
for sale to a buyer like Walt Disney Co, Apple Inc
, Sony Group or Nike Inc, Reuters
reported on Sunday.
Blackwells criticized Foley for hiring his wife as a key
executive and committing to a 300,000-square-foot, 20-year lease
for office space in New York, among other things.
While Peloton initially became one of the market's favorite
so-called stay-at-home stocks during the pandemic, its fortunes
began to dwindle as gyms opened back up and rivals offered other
products that appealed to customers.
The stock price has plummeted 83% in the last year and the
company is now valued at roughly $8.8 billion compared with $50
billion at the peak of its popularity.
Blackwells' letter followed on the heels of a CNBC report
that said Peloton was temporarily halting production of its
bikes and treadmills amid lower demand.
Even though Foley, who has led the company for nearly a
decade, dismissed the report as false, the news caused the stock
price of Peloton to tumble 24% on Thursday, wiping off $2.5
billion from its market value.
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.
"An agitator like Blackwells doesn't have obvious leverage
and there is only so much that someone can do from outside the
fence line," analysts at Gordon Haskett Research Advisors wrote
in a note on Monday titled "Peloton needn't break a sweat."
Blackwells posted a 99.7% return last year, fueled by
investments in CyrusOne and Monmouth Real Estate Investment
(Reporting by Svea Herbst-Bayliss in Rhode Island
Additional reporting by Aishwarya Nair in Bengaluru
Editing by Arun Koyyur and Matthew Lewis)