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Nov 18, 2021

Peloton sued by investor over faulty post-COVID projections

Shane Obata discusses Peloton

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Peloton Interactive Inc. falsely assured investors its dramatic COVID-inspired sales surge would continue after the end of the pandemic, a Florida pension fund claimed in a lawsuit seeking to recover losses stemming from the company’s stock slump in the past year.

Instead of growing, sales of the company’s stationary bikes and treadmills started falling as the pandemic dragged on and its stock price sunk, wiping out billions of dollars of shareholder value, the fund claimed in the lawsuit, filed Thursday in Manhattan federal court.

Lawyers for the pension fund of the city of Hialeah, Florida, said in the complaint that the company and its executives repeatedly told investors that a dramatic surge in sales in 2020 wasn’t primarily due to COVID, but that the company’s growth and financial results were sustainable.

In one case, Peloton Chief Executive Officer John Foley told an investor the company’s results had “nothing to do with COVID” and instead were simply based on “a human need of, I want to get fit, I want fitness in my life in a consistent way,” according to the lawsuit.

In the proposed class-action lawsuit, the City of Hialeah Employees’ Retirement System seeks to represent all investors who acquired Peloton stock between Dec. 9, 2020 and Nov. 4, 2021.

Peloton didn’t immediately respond to a request for comment, sent after regular business hours.

Peloton’s stock price slumped in August after the company reported “material weakness” in financial reporting. It declined further in November when the company dropped its revenue guidance from US$5.4 billion to as low as US$4.4 billion.

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That disclosure caused the stock to drop 35 per cent in one day, “erasing US$8.1 billion in shareholder value,” according to the lawsuit.

The case is City of Hialeah Employees’ Retirement System v. Peloton Interactive Inc., 21-cv-09582, U.S. District Court, Southern District of New York (Manhattan).