Peloton’s co-founder is stepping down as CEO as the company prepares to lay off thousands of employees.
Barry McCarthy, the former chief financial officer of Spotify, will succeed John Foley, who has been the company’s CEO for the past ten years.
Despite the adjustment, one of Peloton’s largest investors reiterated its demand that the company be sold.
Sales of the company’s bikes and treadmills soared during the pandemic, but the post-lockdown return to gyms has left the company worth less than a quarter of its high $50 billion estimate.
Mr McCarthy was the “perfect leader to take the company through its next phase of expansion,” according to Mr Foley. Mr. Foley will take over as executive chairman of Peloton.
Peloton, based in the United States, claimed it will lose roughly 2,800 employees globally owing to a reduction in demand for its goods after announcing the change in leadership.
On Tuesday, the company’s stock rose as much as 19 percent on the New York Stock Exchange.
However, Blackwells Capital, one of Peloton’s largest investors with a nearly 5% interest in the firm, said the improvements did not satisfy investors’ concerns and reiterated its request for the company to be sold last month.
“Mr Foley has demonstrated that he is unfit to run Peloton, whether as CEO or executive chair, and he should not be hand-picking directors, as he appears to have done today,” said Jason Aintabi, Blackwells’ chief investment officer.
Blackwells stated in a Monday presentation to Peloton that the company had been “horribly mishandled, with unrestrained excitement taking the place of disciplined leadership.”
Mr Foley’s leadership abilities were criticised in the presentation, which claimed he had made “a succession of poor judgments relating to product, pricing, demand, safety, and capital allocation.”
Peloton and its user base, according to Blackwells, are “very appealing” to firms like Nike, Apple, Disney, and Sony, which are trying to expand their position in the home, health, and wellness sectors.
Mr. Foley told The Wall Street Journal that the firm was “open to investigating any idea that could create value for Peloton shareholders,” but he didn’t elaborate.
According to Wedbush Securities analysts, the change in leadership made it more probable that Peloton would be sold in the future.
“If a bidding process commences, we see Apple as the most likely buyer due to the strong strategic match with its healthcare/fitness/subscription aspirations,” they said, adding that “Amazon and Nike, among others, might be potential bidders in the mix.”
“The reality is that Foley was the Peloton growth plane’s pilot, and his departure creates a grim picture with the major visionary no longer in charge.”
Peloton may be worth between $12 billion and $15 billion, according to analysts, depending on timing and competition.
Peloton announced its cost-cutting measures on Tuesday, saying that in addition to employee reductions, about 20% of its corporate personnel would be laid go.
The choice was “not taken lightly,” according to Mr Foley. The corporation expects its restructuring effort to cost around $130 million, with severance payments accounting for the majority of the expenditure.
The firm also said that it was “winding down” the construction of the Peloton Output Park in Ohio, where it had aimed to manufacture exercise equipment and create 2,000 jobs. It will cost $60 million to store the plant.
Peloton’s “connected fitness” subscriptions increased by 66% year over year in the second quarter of its fiscal year, while paid digital members increased by 38%. The company’s total revenue increased by 6% to $1.1 billion in the third quarter.
The company has lowered its sales projection for this fiscal year from $4.4 billion to $4.8 billion to $3.7 billion to $3.8 billion.