PELOTON DEADLINE ALERT: Bragar Eagel & Squire, P.C. Remind Investors that a Class Action Lawsuit Has Been Filed Against Peloton Interactive, Inc. and Encourages Investors to Contact the Firm

By: Bragar Eagel & Squire, P.C. via Business Wire

August 04, 2023 at 21:00 PM EDT

Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, reminds investors that a class action lawsuit has been filed against Peloton Interactive, Inc. (“Peloton” or the “Company”) (NASDAQ: PTON) in the United States District Court Eastern District of New York on behalf of all persons and entities who purchased or otherwise acquired Peloton securities between May 10, 2022 and May 10, 2023, both dates inclusive (the “Class Period”). Investors have until August 8, 2023 to apply to the Court to be appointed as lead plaintiff in the lawsuit.

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Based in New York City, Peloton is a fitness-equipment and media company. During the Class Period, Peloton sold internet-connected stationary bicycles and treadmills that were designed and marketed for use in customers' homes. The bicycles and treadmills include connected touchscreen devices through which customers can access exercise classes and other content. To that end, in addition to the exercise equipment, Peloton sells monthly subscription services that allow customers to access fitness classes using their Peloton equipment, or alternatively to access classes and related content on their own devices, without using Peloton equipment.

For most of 2020 and 2021, as the COVID-19 pandemic and related stay-at-home orders and business closures largely kept individuals out of the gym, the demand for in-home exercise options increased dramatically. Against that backdrop, in the months leading up to the Class Period, Peloton experienced unprecedented demand for its products and services. As Defendant John Foley ("Foley") confirmed in statements to investors on February 11, 2021, "there's been crazy demand for our products because gyms have been closed or you didn't want to go to the gym because you might get COVID there. So, the demand has been through the roof[.]"

The complaint alleges that, throughout the Class Period, Defendants repeatedly and falsely assured investors that Peloton's recent success was not primarily due to COVID-related increased demand, but rather that the Company's growth and financial results were sustainable and would continue post-COVID. For example, on December 9, 2020, the first day of the Class Period, in response to an investor's question about "how a post-COVID world impacts [Peloton's] view of [its] business opportunity," Defendant Foley assured investors that Peloton's results "ha[ve] nothing to do with COVID. That is a human need of I want to get fit, I want fitness in my life in a consistent way; . . . I want it to be convenient, I want it to be fun, I want it to be motivating, and I want it to be a great value. And all of those things are foundational to what Peloton delivers, always delivered it. We delivered it in pre-COVID, during COVID, and we will deliver it post-COVID." Defendants also represented to investors during the Class Period that investments in the Company's supply chain, including increasing the number of bikes and treadmills produced and reducing the average time it takes to deliver products to customers, were sound investments that would enable Peloton to align supply and demand for its products. For example, on February 4, 2021, in a letter to Peloton shareholders, the Company stated that "our supply chain investments over the last several months are helping us better match our supply and demand going forward." Accordingly, Defendants represented that the rising inventory levels reported in the Company's periodic financial reports filed with the SEC during the Class Period reflected outstanding demand, including orders that had not yet been filled, rather than excess supply that outpaced waning demand.

Defendants' Class Period representations that Peloton would continue to succeed and grow post-COVID were false. In truth, Peloton's Class Period financial results were primarily driven by COVID-related increases in demand for at-home exercise options. As gyms have reopened and other outside-the-home exercise options have become more available because of COVID vaccinations being more widespread and other COVID-related restrictions abating, demand for Peloton's equipment and subscription services have declined substantially. Moreover, rather than matching supply and demand, Peloton had a massive growth in inventory that far exceeded customer demand. Further, the Company has admitted that it suffered from a material weakness in its internal control over financial reporting during the Class Period, specifically concerning inventory levels. In light of that material weakness, the Company could not accurately report its inventory levels, and had no sound basis to represent to investors that supply, and demand were aligned.

The truth began to emerge on August 26, 2021, after the market closed, when Peloton disclosed, one day in advance of its announcement of the Company's financial results for its fiscal year 2021, that "in the course of our fiscal 2021 audit process, a material weakness was identified in our internal controls over financial reporting with respect to identification and valuation of inventory." In the Company's Annual Report for its fiscal year 2021, filed with the SEC on Form 10-K on August 27, 2021, it further disclosed that "this material weakness arose because our controls were not effectively designed, documented and maintained to verify that our physical inventory counts were correctly counted and communicated for reporting in our financial statements."

As a result of these disclosures, the price of Peloton common stock declined by $9.75 per share, or 8.5%, from a closing price of $114.09 per share on August 26, 2021 to a closing price of $104.34 per share on August 27, 2021. At the same time, however, Peloton made false, reassuring statements to investors, including issuing guidance of $5.4 billion of total revenue for fiscal year 2022 (beginning September 1, 2021), representing 34% year-over-year growth. Discussing that guidance, Defendant Jill Woodworth claimed that "we are entering fiscal 2022 with a normalized backlog for our Bike portfolio and guidance reflects our expectation of continued strong demand."

Then, on November 4, 2021, after the market closed, Peloton shocked investors when it disclosed that it had revised its full year revenue guidance down to a range of $4.4 to $4.8 billion dollars due to declining demand as its customers were increasingly free to exercise outside the home. And regarding inventory, Peloton disclosed that inventory totaled $1.27 billion, a 35% increase over the prior quarter, 91% of which were "finished products" that the Company still held.

As a result of these disclosures, the price of Peloton common stock declined by $30.42 per share, or over 35%, from a closing price of $86.06 per share on November 4, 2021 to $55.64 per share on November 5, 2021, erasing $8.1 billion in shareholder value.

If you purchased or otherwise acquired Peloton shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.

About Bragar Eagel & Squire, P.C.:

Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York, California, and South Carolina. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.