What happened
Peloton Interactive (PTON +0.85%) is still trying to navigate the collapse of its business due to the reopened economy, but this week its stock is tumbling 17.5% from where it closed last Friday, according to data from S&P Global Market Intelligence.
The connected fitness leader is heading lower after the company's co-founder dumped a bunch of stock and an activist investor said it's not expecting any substantive change at the company despite a C-suite shuffle.
NASDAQ: PTON
Key Data Points
So what
Blackwells Capital is agitating for major changes at Peloton, including putting itself up for sale and firing co-founder and CEO John Foley because of his alleged mismanagement of the company. While Foley announced he would step down as CEO of the fitness equipment maker, he also said he would assume the role of executive chairman.
Some don't see that as actually achieving anything because that position is still a more hands-on position in the day-to-day operations of a company as opposed to a board chairman role many retiring executives take.
Blackwells apparently had some pessimistic comments about the potential for change at the company as a result. It also likely wasn't going to get much traction with its call for Peloton to put itself up for sale since Foley owns a supermajority stake in Peloton's voting stock and he would have to sign off on any sale.
Yet it was also Foley who was selling company stock, around $50 million worth to MSD Partners, an investment vehicle of Dell Technologies founder Michael Dell.
Image source: Peloton Interactive.
Now what
Although the stock sale created investor angst -- coming as it does when the stock price has been hammered, which could suggest he doesn't have as much faith in the company -- it really is a non-event.
Insiders can sell company stock for any reason, or no reason at all. Investing legend Peter Lynch was never much bothered by executives selling their shares, noting, "insiders might sell their shares for any number of reasons, but they buy them for only one: They think the price will rise."
That's what investors should keep an eye out for and get excited about when they see it happening.
The more worrisome piece is Foley not really giving up day-to-day control of the company. Moreover, because he personally chose his successor and was responsible for choosing many of Peloton's current directors, the hedge fund and others see the board as still beholden to Foley and his wishes.
The market was hopeful there would be meaningful change following the shakeup, but that is looking less like a possibility, and with gyms and other out-of-home entertainment options fully available to consumers, Peloton Interactive could be spinning its wheels for some time to come.
