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Peloton Stock Surges As CEO John Foley Ousted, But Activists At Blackwells Says It's Not Enough

Pelton CEO will step down after the group posted a $266.5 million second quarter loss and unveiled a major cost-cutting overhaul many see as a move to make the fitness equipment maker more attractive for a takeover.

Updated at 11:05 am EST

Peloton  (PTON) - Get Free Report shares moved higher Tuesday after the group said CEO John Foley would step down amid what it called a 'major' restructuring that includes 2,800 job cuts and published its formal December quarter earnings.

Peloton said Foley, 50, will transition to the connected fitness equipment maker's board to make room for Barry McCarthy, a former Spotify  (SPOT) - Get Free Report and Netflix  (NFLX) - Get Free Report CFO, in a move many see as preparing the group for an outright sale. 

Activist investors at Blackwells Capital LLC have pressed for changes in both the company and the board, while prompting it into takeover talks, following last month's multi-billion dollar sell-off and a disappointing set of pre-released earnings. 

As a result, two new members will also join the Peloton board -- Angel Mendez and Jonathan Mildenhall -- while longtime director Erik Blachford will step down. The group is also planning to eliminate 2,800 jobs, or nearly a fifth of its overall staff, and wind-down the development of a $400 million facility it had planned to build in Ohio.

The group was not, however, impressed by news of Foley's transition.

“Peloton CEO John Foley naming himself Executive Chairman and hiring a new CFO does not address any of Peloton investors’ concerns," Blackwells said in a statement emailed to TheStreet. "Mr. Foley has proven he is not suited to lead Peloton, whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done today.” 

Peloton shares were marked 19.7% higher in late morning trading Tuesday to change hands at $35.57 each.

Peloton said it lost $1.39 per share over the second quarter, or $266.5 million, firmly inside prior guidance of a loss of $350 million, on sales of $1.13 billion.

Looking into the current quarter, Peloton said it sees revenues in the region of $950 million to $1 billion, and negative adjusted earnings of between -$125 million and -$140 million.

Blackwells called for the firing Foley, and the potential sale of the company, in the wake of last week's multi-billion sell-off following reports of production halts and cratering customer demand.

Reports then surfaced that Amazon is exploring talks with senior Peloton officials, while Britain's Financial Times also reported potential interest from Nike  (NKE) - Get Free Report, one of the companies pushed by Blackwells Jason Aintabi as a possible suitor.

"Since founding Peloton a decade ago, we've grown this brand to engage and motivate a loyal community of more than 6.6 million Members," Foley said in a statement. "I'm incredibly proud to have worked with such talented teammates over the years who have helped me build Peloton into what it is today, and I'm confident that Barry is the right leader to take the company into its next phase of growth."

"He's not only recognized as an expert in running subscription business models and helping category-leading digital streaming companies flourish, but he has also had tremendous success in partnering with founder CEOs at other brands," he added. "I'm excited to learn from him and work alongside him as Executive Chair."