Peloton – A call for action [pdf]

I get the impression they don&#x27;t like the CEO very much. That was an impressively brutal attack on him, with probably the worst damage inflicted by the CEO&#x27;s own statements.<p>Blackwells is obviously not a neutral party here, there&#x27;s a reason they created this thing. But on first glance it looks like a pretty solid argument that the management at Peleton is seriously flawed. I don&#x27;t really buy the arguments on why Peleton is a good business and comparable to Streaming somehow.<p>I do find the arguments around bad governance structures and oversight weird though, as those should have been known before they invested. Doesn&#x27;t mean they&#x27;re wrong, but obviously this didn&#x27;t stop Blackwells from investing in the first place.

The fact is. Not every company can be a $12B company. Peloton might be a super successful $1B company, who slowly tries to creep into new areas for growth.<p>And it sounds like Blackwell understand this, and instead of pushing for Peloton to focus internally on its product and get rid of the extra fat, they want a fast sale to a not-really-smart company. So they can at least get some ROI<p>People talk about monthly fees being high or fair, thats not it at all, Pelotons prices for hardware and membership or completely fine. What they did do is<p>* Pouring money into building their own factories (even Apple doesn&#x27;t do this at their scale, they pay Foxconn)<p>* Building a full fledged apparel brand<p>* Hiring way too many engineers, FAANG level org size<p>* Having their own warehouses and delivery full time employees<p>No other company does this. I&#x27;m not sure what the long term plan was, maybe they become a white label manufacturer for other start ups? It failed, badly<p>You do not need 14,000, or 11,000, or 3,000 employees to do what Peloton currently does (again, maybe they had grandiose plans in the pipeline). If we want to compare proprietary hardware + Android + online streaming service. When MIRROR was bought out by Lululemon for $500M, they had 200 employees<p>I have a feeling no one has offered Foley more than $3B for the company, and i&#x27;m being generous

&gt; Q: Is there anything about being CEO that you don’t like, that you like to delegate?<p>&gt; A: Finance. Our CFO does 99% of finance. I engage because I want to know how we’re doing. But to say I don’t add value to her operation is an understatement. You can also say the same with technology. Our CTO doesn’t get any help from me. I’ll go sometimes months without talking to our CTO, which as a CEO of a technology company, that’s kind of rare.<p>Wow...

So many words trying to obfuscate the simple fact that “We are a treadmill maker trying to masquerade as a tech company.”

Peloton does have a lot going for it. From everyone I&#x27;ve heard, their physical products are well made (with the exception of the treadmill issue..). They have extremely low churn which is hard to do in fitness.<p>The main problem is that they grew too fast. All the pandemic sales were probably just pulled forward from future sales, not a sign of sustainable growth. They overcommitted and now need to trim back again.

While a brutal dressing down of the company, I have to admit that this is one of the most nicely made decks I’ve ever seen.<p>What is the reasoning behind them sharing this publicly, I wonder?

&quot;POOR DECISION MAKING: UNNECESSARY &amp; EXPENSIVE OFFICE SPACE IN NYC&quot;<p>This whole report is absolutely scathing, but this particularly stood out to me. I&#x27;ve actually been in a similar situation where a CEO decided he was going to rent extremely expensive office space, in one of the most over the top pricey areas of Los Angeles, simply because it was close to his residence.<p>This snowballed into other various stupid financial choices, and I was lucky enough to get out before the entire office got fired.<p>This serves as a very good argument for fully remote companies. Get a corporate we work account for the extremely rare case where you need a physical presence.<p>The brand is pretty damaged though. They had a short window where the Equinox crowd had nowhere to spend their exorbitant incomes. No shortage of cheaper alternatives exist. I suggest buying a used exercise bike and playing Eye of the Tiger on repeat for 30 minutes.<p>Infact if you don&#x27;t have access to Eye of the Tiger you can just sing it to yourself.<p>Eye of the tiger it&#x27;s the thrill of the fight, saving money on a used bikes.

It&#x27;s interesting but I think it&#x27;s important to take it with a huge pinch of salt. It&#x27;s obviously designed as a hit piece, pushing their opinion the CEO needs to go, and as such is chock full of selective quotes and figures designed to paint one picture.<p>ed: the top comment from yesterday says it better <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=30272154" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=30272154</a>

I have my gripes about Peloton as a former employee (left back in November 2021), but this is just a hit piece. They&#x27;re taking whatever facts that conveniently fits their narrative.

Interesting to note that the CEO (39.6%) and co-founders (18%) have 58% of the voting power of Peloton&#x27;s stock.

There are a lot of pages showing how management enriched themselves by selling shares and because of their RSU policies.<p>But the whole purpose of this presentation is to get them to sell the company at 75$. On the most basic level this looks to me like this investor is salty that they didn&#x27;t sell when the share price was high and now they want to get some of their losses back. Or is their argument that the CEO made false promises? You don&#x27;t have to listen to him, the balance sheet is all you need to make your decisions.

While I could think of plenty of adjectives to describe this deck, amazing would certainly not be amongst them. It&#x27;s the traditional hit piece from activist funds. It looks pretty. It reads well without having to think to much because well, it&#x27;s not heavy on substance. They want the company to be sold but they fail to present a convincing case for why it&#x27;s the correct strategic decision.<p>There is nothing on Peloton competitors, nothing on the market trend. They rightfully point that Peloton failed to properly forecast market demands but nothing on the future outlook and how Peloton production capacity and stock align with futur predictions. No real analysis of why the company which is profitable would be better able to produce value if it was bought out.<p>My key takeaway from it is that Foley is bad at PR. Gosh, I hate this deck and I really hate what activist funds are turning finance into.

Do I read the decks properly, or do they have only 2331 subscribers for Q4 2021? This looks like a super low for such big valuations of their disruptive product.

Well, that&#x27;s a type of deck that I never seen before. The amount of times and ways they leverage the actual bad state of the company to make it look like a worthwhile investment is astonishing.

Yesterday’s thread about this: <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=30272154" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=30272154</a>

Dual class shareholder companies are a terrible idea. Even if you believe one person should have more control for the owners, does it really make any sense for that person&#x27;s heirs to have more control? People only accept it because the management has power over short term investors (VCs, people who buy the IPO) and the long term investors-- pensions, mutual funds (aka little guys) get stuck with it.

It is the same thing over and over. Founders are praised when the company is growing, and the same founder for the same reasons are criticized when the company is not growing anymore.<p>If the CEO is so bad, how did he manage to create such a valuable company while almost nobody on earth has been able to do it ?

This is probably the most interesting PDF I&#x27;ve ever read. As a Peloton member, I never really gave much thought into how the business side of things ran - I just really enjoy the product.<p>Seeing $PTON so low surprised me as I haven&#x27;t really been following the news much. I just bought some shares.

I&#x27;m in awe of how many different sources a person had to sift through in order to get all this data. Is there software in this space? My naive sense is that it took months to get this deck together.

Does anyone here actually use Peloton equipment? My spouse wants one of the bikes but I&#x27;m wary of having a subscription to a company with questionable future longevity.

From what I&#x27;ve heard, Peloton is spending way more than the retail price of the bikes to make them. There&#x27;s certainly plenty of successful businesses that have some sort of loss-leader and then make up for it with follow-on products or services (e.g. game consoles and game publishing). However it seems like they were happily riding the huge growth in subscribers and revenue but not really managing costs in a way that it would ever be net positive.

Excuse me but I don&#x27;t see in there any reference to what made peloton stock &quot;actually&quot; explode which was the enforcement of wfh. This is a VERY biased deck.

The question it begs is if the CEO is not the right-person for the job (which they don&#x27;t appear to be) then why keep him on as executive chair? That sounds like dragging things out for the sake of it, if he doesn&#x27;t add anything useful, buy him out and send him somewhere else, it sounds like his experience is not really needed any more?

Open question. How easy would it be for Apple to build a Peloton competitor from scratch? Are there any real barriers to entry?

This is yet another chapter in the long series of stories about investors who destroy the goose that lays golden eggs. The analysis is a &quot;well, what did you do for us lately?&quot; that disregards unsustainable, explosive growth in 2020 and an obvious correction 2021.<p>Putting con-imbeciles on a board is a recipe for disaster.

I got downvoted the other day for calling Peloton a Ponzi scheme, look at the &quot;TROUBLING INSIDER SELLING AND PLEDGING&quot; slides and the quotes like &quot;We have built a team that I believe is ready to run a $500 billion company. Pick a number. A FAANG-style leadership team&quot; that the CEO was making.

this was an interesting read. Never seen a doc like this before.

That was rough. I have similar vibes from the investor call a week after Cyberpunk 2077 released but even that was much more generous.<p>It all seems like well-earned criticism. As someone with no stake I am happy to see the consumer-hostile behavior of the treadmill murder machine incident be given its own slide.

I don’t understand the disproportionate hate Peloton gets. They have a fanatical costumer base.<p>From past experience with similar attitudes towards fancy gyms, fitness products and basically anything catering to the rich, hot and fit, I can only think of one cause: <i>ressentiment</i>.

Peloton just didn&#x27;t wine and dine and wow Wall Street enough for them to consistently hype the stock and now it&#x27;s the CEOs fault? Because he didn&#x27;t create the &quot;magic show&quot; that Wall Street wanted to see? John Foley is a founder of the Peloton business and created value from nothing to a leading fitness technology company. Why should he have to justify anything he does to asset managers who have never created any value in their entire careers? Wall Street only destroys value and extracts they don&#x27;t create anything.<p>You&#x27;re a founder and your business goes through a few rough years as you build the business and experiment? Wall Street says &quot;quit, give up and sell&quot;. What a bunch of Wall Street hacks and they pushed out a perfectly good CEO, really sad. Just so the business could be sold off for a fraction of its&#x27; real value to some conglomerate to let it wither away and die.

Wow. That presentation is like an autopsy level of scrutiny and criticism. Many of the quotes look like they were taken out of context. I am not sure, but perhaps a bit more context than just the quotes would be fair.

A lot of Peloton in the news lately. Is there anyone that owns a Peloton machine that can comment on what they like and dislike about Peloton? Have you guys noticed a decline in the product, software, classes?

Peloton is a great product and Foley built it up from nothing, what&#x27;s the point of keeping all that voting power if you don&#x27;t use it to tell these private equity groups to fuck off?<p>I hope they don&#x27;t sell.

I&#x27;m surprised by this claim &quot;Attractive Lifetime Value Low churn&quot;. I thought the main reason Peloton was falling out of favor was the recent high churn numbers.

I wonder how Peleton imploded while iFit (owner of NordicTrack and other fitness brands) has been humming along for years offering the same hardware+ streaming combination.

Direct link to view the pdf: <a href="https:&#x2F;&#x2F;docmadeeasy.com&#x2F;v&#x2F;656502559" rel="nofollow">https:&#x2F;&#x2F;docmadeeasy.com&#x2F;v&#x2F;656502559</a>

&gt; Seemingly admitting the lack of internal capability, discipline and experience, Foley is looking to outsiders for answers<p>&gt; Hiring McKinsey is a clear declaration of failure

&quot;I’ll go sometimes months without talking to our CTO, which as a CEO of a technology company, that’s kind of rare.&quot;<p>I can&#x27;t not read this as a joke.

This is a deck from a tiny activist investor that were angling to get rid of the CEO for a while. They are not &quot;their investors&quot;.

Honestly I&#x27;m very concerned that my expensive bike will become a brick in the future if Peloton goes out of business.

Kind of hard to see why someone would have invested in this rocketship in the first place.

That&#x27;s fascinating to see. Anywhere I can see other decks from different places?

Where this road is going, it looks highly likely it is going to Amazon or even Meta.

So this is the company that is supposed to rescue Stadia cloud services?

For sure lots of issues for peloton after those accidents with kids.

Seems a lot of people think this is a deck <i>by Peloton</i>, not by Blackwells Capital. The title should be changed to clearly reflect that.

What&#x27;s up with a treadmill?<p>Is it so special because it has WiFi?<p>HN rules forbid shallow dismissal. I would only say, adding a WiFi to a random thingy is a weekend project for any engineering company i&#x27;ve worked in, in the most literal sense. Design injection molding enclosure, add relays, motor VFD, rpm sensor, wifi module, wire &amp; screw together.<p>I&#x27;ve done few project for sporting goods makers, and even no-name village factories in China with zero marketing probably ship more goods per months than this treadmill sell in a year.

Get a bike (or some walking&#x2F;running shoes), go outside, and exercise. But since that doesn&#x27;t require cool gear and apps...

I don&#x27;t know anything about Peloton or its management, but the main takeaway from this deck is something I already knew: (1) private equity guys are assholes, (2) who are obviously compensating for something inadequate three feet below the nose.