Shares in the pandemic-era cycling phenom Peloton took a steep downhill ride Thursday, after CNBC reported that the company was halting production of its fitness bicycles and treadmills following a crash in demand. Peloton’s Nasdaq shares closed down 24% on Thursday, at $24.22 each, erasing $2.5 billion from the company’s market cap.
In a blog post Thursday evening, company CEO John Foley denied the details of CNBC’s report and announced that the firm had “identified a leaker” responsible for sharing the confidential information with the news organization.
“The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy,” Foley said, adding that “rumors that we are halting all production of bikes and Treads are false.” Foley said the company is “moving forward with the appropriate legal action” against the unidentified leaker.
According to CNBC, Peloton halted production of its most expensive bike last month and will maintain the freeze until June. Peloton will also stop production of its Treads treadmill for the next six weeks, CNBC says, and scrap production of its more expensive Treads+ machines for the remainder of its fiscal 2022, which runs until July.
The reported freeze on production would mark a U-turn from last year when the loss-making company opened a new factory to keep up with runaway demand. But the U.S. is no longer in lockdown to the extent it was when the pandemic began, and gyms are stealing customers back from at-home-fitness providers.
Last year, Peloton’s declining sales dragged the company’s share price down 70% from a peak of $163 in December 2020. The stock took a sharp plunge in November when Peloton slashed its full-year revenue guidance by $1 billion. Following Thursday’s rout, the company’s stock is now trading below $25, its price when it launched on the Nasdaq in September 2019.
Although Foley denies the company is halting production of its bikes and treadmills, he admits the group is “right-sizing our production” and “resetting our production levels” to align with a post-pandemic era slump. Foley also hinted the company would lay off workers, as Peloton “now need[s] to evaluate our organization structure and size of our team.”
Peloton is officially in a “quiet period” before the company announces earnings on Feb. 8.
“I know there is a lot of noise and anxiety in our environment right now, which is why I wanted to take this moment to provide some additional context for you all as we navigate the next few weeks together,” Foley said.
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