Blackwells Capital Wants Peloton To Consider Sale, Targets New CEO

(RTTNews) - Activist firm Blackwells Capital is pushing connected fitness company Peloton Interactive's (PTON) to consider selling out, saying that the company has not made any progress under new Chief Executive Barry McCarthy.

Blackwells Capital said in a statement, "Peloton's powerful brand, proprietary technology, engaging fitness instructors and loyal subscriber base can be shaped into a much more attractive business."

The firm is of the opinion that change cannot happen effectively in the public markets, as Peloton founder and former CEO John Foley has control of the company through his super-voting shares.

This step follows two months after Foley became the executive chairman and McCarthy succeeded him at Peloton. The shake-up took place even as Peloton was witnessing the high demand for its bikes and treadmills wane as costs increased, affecting profits. In February, Peloton announced plans to cut about 2,800 jobs and slash roughly $800 million in annual costs.

Chief investment officer of Blackwells, Jason Aintabi said, "Two months have passed since John Foley was promoted into the role of Executive Chairman and Barry McCarthy came out of retirement to assume the post of CEO. Remarkably, shareholders are worse off now than before."

He added, "Blackwells continues to believe that Peloton cannot be controlled by an executive chairman who appears to be under extreme duress, and will pursue all remedies available to it and to all shareholders."

Blackwells had first raised issues with Peloton in January after media reports, including one that the company hired consulting firm McKinsey & Co. to look into cost-cutting opportunities across the business and that Peloton had plans to stop production of some of its products as the demand waned.

At the time, Blackwells had said that Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies like Apple or Nike. Since taking over as CEO, McCarthy is sure about one thing that he will turn the company around, than consider selling it.

Under his leadership, Peloton already appointed a new supply chain chief and is also testing a new pricing system, where customers pay a single monthly fee for both their workout equipment and for access to fitness classes.

McCarthy's background with membership-based businesses has led to speculation that he would shape Peloton to become more focused on recurring subscription revenue over hardware sales.

Even though, Blackwells is of the opinion that a better way to restructuring is necessary and the company's cost-cutting measures won't go far enough.

The firm said that Peloton could now get a takeover price now, which would take years to achieve as a single entity and said Netflix, Google or Amazon could purchase the company.