Leaker Sinks Peloton Stock With Confidential Information

Friday, 21 January 2022

Here’s another one for the “I’d rather be captaining The Titanic than running a publicly-held company” file. Yesterday reporter Lauren Thomas at CNBC published a rather blockbuster report under the headline “Peloton to Halt Production of Its Bikes, Treadmills as Demand Wanes”, which began:

Peloton is temporarily halting production of its connected fitness products as consumer demand wanes and the company looks to control costs, according to internal documents obtained by CNBC.

Peloton plans to pause Bike production for two months, from February to March, the documents show. It already halted production of its more expensive Bike+ in December and will do so until June. It won’t manufacture its Tread treadmill machine for six weeks, beginning next month. And it doesn’t anticipate producing any Tread+ machines in fiscal 2022, according to the documents. Peloton had previously halted Tread+ production after a safety recall last year.

The company said in a confidential presentation dated Jan. 10 that demand for its connected fitness equipment has faced a “significant reduction” around the world due to shoppers’ price sensitivity and amplified competitor activity.

Not good, to be sure. But when I saw this story drop, my first question wasn’t about demand for Peloton’s bikes and treadmills, but simply “Who leaked these documents to CNBC and why?” The obvious answer for why is that they shorted the stock before leaking the documents. That Peloton’s share price would take a dive the moment this report hit was as close to a sure thing as you can get on the stock market.

Late yesterday, Peloton co-founder and CEO John Foley released a company-wide memo:

We have always done our best to share news with you all first, before sharing with the public. This week, we’ve experienced leaks containing confidential information that have led to a flurry of speculative articles in the press. The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy. It has saddened me to know you read these things without the clarity and context that you deserve. Before I go on, I want all of you to know that we have identified a leaker, and we are moving forward with the appropriate legal action.

If he’s right, I think Mr. or Ms. Leaker better have a good lawyer.

Foley continues (boldface in original):

As a public company that is in a pre-earnings “Quiet Period”, we are limited in what information we can share. However, we issued a pre-earnings press release earlier this evening about our preliminary Q2 results, in order to offer an initial and more accurate picture of our business performance. [...]

Rumors that we are halting all production of bikes and Treads are false

If you think it’s a coincidence that these documents leaked during the company’s quiet period, I have an NFT for a bridge in Brooklyn to sell you.

Is Peloton in trouble? I don’t know. Everyone I know who has one of their bikes — including my wife, and my podcast co-host — absolutely loves the damn things. They’re good, well-made bikes, on par with gym-quality bikes, not typical (and significantly lower-priced) home equipment. Like Apple’s hardware products, Peloton’s equipment is expensive but generally not overpriced. But a subscription-based business model might not have a future in the face of competition from companies like, well, Apple — the company that makes what’s almost certainly the most popular fitness-tracking watch worn by Peloton’s existing customers (and potential future customers).

But I wouldn’t count them out yet. I like any company that’s focused on making the best, not the most.