Peloton, once the darling of lockdown living rooms, is being hauled back into court. A federal appeals panel in Manhattan has revived a shareholder lawsuit accusing the fitness company of disguising a mountain of unsold bikes and treadmills while gyms reopened and demand dried up.
The 2nd U.S. Circuit Court of Appeals split 2-1 in its decision, saying investors can try to prove that Peloton’s leadership inflated the company’s stock price with misleading assurances. At the center of the case are three statements, including former CEO John Foley’s fiery defense in 2021 that a $400 price cut on its flagship bike was an “absolutely offensive” sales tactic — when, according to the complaint, it was really a scramble to offload warehouses stuffed with idle equipment.
Shareholders argue that Peloton’s filings painted excess inventory as only a “potential” risk, even though the problem was already very real. Judge Steven Menashi, writing for the majority, said investors had presented enough to plausibly claim deception.
The fallout was brutal: between February 2021 and January 2022, Peloton’s stock plummeted more than 80%, punctuated by a single-day 35% crash after the company slashed its earnings outlook by up to $1 billion and admitted 91% of inventory was sitting unsold. Since its pandemic peak, the stock has bled roughly 95% of its value.
Not everyone on the bench agreed. Judge Jon Newman dissented, dismissing the idea that Foley or the company’s statements were misleading. He predicted the lawsuit won’t survive long, calling it unlikely investors will prove deliberate fraud.
The case now returns to U.S. District Judge Andrew Carter, who previously threw out much of the complaint but will be asked to take another look.
Peloton has kept quiet in response to the ruling. Earlier this month, the company surprised Wall Street with a fourth-quarter profit and stronger-than-expected revenue guidance, even as it announced fresh layoffs — trimming 6% of its workforce.
The revived lawsuit, City of Hialeah Employees’ Retirement System et al v Peloton Interactive Inc, keeps the embattled fitness brand fighting on yet another front.
