The rise and fall of Peloton, from pandemic-era success story to its stock hitting a record low

• Peloton was a Wall Street darling during the pandemic, with a market cap of around $50 billion.
• Now, its CEO is out after two years, it announced more layoffs, and its stock hit a record low.

At the height of the pandemic, Peloton was on top of the world.

Its stock pushed $171 per share and its market cap hovered around $50 billion.

On Thursday, the company announced its CEO was out and its stock was trading below $3 — a record low.

The company has struggled since the pandemic boom and falling demand for its products. In 2022, the company laid off more than 5,000 staff members, saw four top executives depart, and reportedly considered a potential sale to the likes of Amazon, Apple, or Nike. The company has also seen mass layoffs and recalled millions of bikes.

It's a stunning reversal for a company once at the top of the connected-fitness food chain, and it's the result of a culmination of factors, including the fading popularity of at-home fitness and a mishandled logistics operation.

Now, to re-energize its business, the company is focused on pushing beyond the at-home fitness market. It is incentivizing businesses to offer Peloton as a workplace benefit and adding Peloton equipment to local gyms, apartments, and hotels, Bloomberg reported.

Here's how Peloton got its start and became a fitness world darling, and just as quickly saw its decline.

Peloton was founded in 2012 by a group of ex-IAC employees

John Foley, Hisao Kushi, Tom Cortese, and Graham Stanton — four of Peloton's five cofounders — met working at media and internet company IAC. The fifth cofounder, Yony Feng, met the group through his roommate who worked at IAC.

Foley has said that the vision for the company was his, but that his four cofounders "took it, ran with it, and built it while I was gone" raising money, he told Fortune in 2021.

Prior to founding Peloton, Foley was president at Barnes & Noble, overseeing its e-commerce business.

The early version of its bike was 'janky,' and it struggled to find investors

Foley is a self-professed "boutique fitness addict," as well as an avid cyclist. But the early versions of the Peloton bike didn't look like something you'd find in a high-end fitness studio, the company's first instructor, Jenn Sherman, told Fortune.

"They had this little tiny corner of the office that was sectioned off by black velvet curtains. There was a camera on a tripod sticking through a circle people literally cut out of the curtain. There was a janky, broken bike in there — the instructor bike was like this rusted piece of crap. It was ridiculous," she said.

Still, Sherman signed on. Meanwhile, Foley was on the road for the first three years, pitching what he told Business Insider in 2018 was as many as 400 investors.

"I got 400 'nos,'" he said at the time. "The worst part is that we're not talking about 400 individual pitches. A lot of people would want me to come back four or five times and have me meet more partners and pitch again. I would say that I've been turned down maybe five or six thousand times."

Still, the company scraped together funding from more than 200 angel investors and put its first bike on Kickstarter in 2013 for an "early bird" price of $1,500.

Peloton quickly developed a cult following

Peloton began shipping bikes in 2014, with Foley and the other cofounders showing off how they worked at pop-up stores inside shopping centers.

But it didn't take long for the company to develop a cult following, thanks in large part to its roster of high-wattage instructors. When the company opened its own studio in New York City, owners of the company's $2,000 bike would make a pilgrimage to Manhattan in order to take a live class with their favorite instructor.

Eventually, big-name investors came calling. "I would say that it took about five years for the really smart money to start getting involved," Foley told BI in 2018. "When Mary Meeker is calling you to say, 'Hey, I want to invest' — that's pretty cool."

That year, Peloton raised $550 million in venture capital funding at a valuation of $4.1 billion, according to Pitchbook.

Peloton expanded its offerings as spinning faded in popularity

Peloton introduced its second product, a $4,000 treadmill called the Peloton Tread, in 2018, and added new types of classes, like high-intensity interval training and yoga, to keep users engaged or get new customers to sign onto a digital subscription, no equipment required.

By 2019, the company had sold 577,000 bikes and treadmills.

In August of that year, Peloton filed for an initial public offering, revealing it had over 500,000 paying subscribers, but also spiraling losses from major investments in marketing and licensing music for its classes.

Peloton went public on September 26, 2019 in what was at the time the third-worst trading debut for a major IPO since the financial crisis.

Peloton's stock plummeted following its 2019 holiday ad

Ahead of the holidays in 2019, Peloton made what was seen as a major public misstep with its infamous "Peloton wife" ad.

The ad, featuring a woman whose husband gifts her a Peloton bike for Christmas, was viewed as being sexist and playing into outdated standards of beauty. Public outrage over the ad sent Peloton's stock plunging 9%, wiping out $942 million in market value in a single day.

But Peloton stood by the commercial, issuing a statement saying it was "disappointed" by how people had "misinterpreted" the ad.

The pandemic became a major boon for Peloton's business

Then, in early 2020, the pandemic hit. Suddenly stuck inside, people turned to at-home fitness and found connection in Peloton's streamed workout classes. The company's share price took off.

By May 2020, Peloton reported a 66% increase in sales and a 94% increase in subscribers. In September of that year, Peloton said that it had had its first profitable quarter, with sales spiking 172% since the same quarter the year prior and revenue rising to $607 million.

But the unexpected uptick in demand showed the cracks in Peloton's logistics operation. Delivery times for new equipment became longer and longer, and Peloton's typically diehard fans began expressing their frustration online.

Then, some customers began experiencing issues with their bikes where pedals snapped off mid-ride. The company took weeks or months to make repairs, further frustrating users. After 120 reports of bikes breaking and 16 reports of customers getting injured, the company issued a recall affecting 30,000 bikes.

Still, 2020 was all around a stellar year for Peloton that included debuting new, higher-end versions of the bike and treadmill and inking a multi-year deal with Beyoncé. A year after the "Peloton wife" ad, the company's market value had hit $34 billion.

In early 2021, Peloton reported its first-ever billion-dollar quarter, driven by holiday sales and sustained demand for at-home fitness as the pandemic raged on. Foley pledged to manufacture "tens of millions" of treadmills and bikes to keep up with surging sales and spend $100 million to speed up deliveries hampered by port congestion.

Peloton had to issue a treadmill recall following a child's death

But in March 2021, tragedy struck when a child was fatally injured in an accident with a Peloton treadmill. Shares dipped 4% following the news and regulators urged a recall.

Foley initially pushed back, calling the warnings "inaccurate and misleading," but by that May, the company announced a recall of the higher-end Tread+.

In an effort to make the treadmill safer, Peloton also made a change that resulted in it becoming unusable unless users paid $39 per month. Following customer outrage, the company said it would work on a fix.

As the pandemic began to recede, so did Peloton's popularity

As the nation continued to move toward reopening — and returning to the gym and fitness studios — Peloton's business took a punch. The company's stock dropped 34% following its fiscal first-quarter earnings in November, which included a dismal outlook for the months ahead.

"It is clear that we underestimated the reopening impact on our company and the overall industry," Foley said in a call with shareholders.

Peloton was also being chased by rivals like Echelon and iFit Health, which offer similar, cheaper products. Peloton filed a lawsuit against them in November 2021, accusing them of patent infringement.

In the meantime, Peloton had been taking reputational hits. A hiring freeze set in, and Black employees voiced concerns over their pay compared with the industry standard. A character in the "Sex and the City" reboot died after using his bike, and then the same thing happened to a "Billions"character soon after. And in December, Foley threw a lavish holiday party as the company's stock tanked.

By January 2022, the company was discussing layoffs, reportedly pausing production of new equipment, and halting plans to open a new $400 million factory. Employees told BI the company's warehouses were filled with excess bikes.

Peloton began laying off employees, replaced Foley, and eyed a potential acquisition

In February 2022, The Wall Street Journal reported that Amazon was eyeing Peloton as a potential acquisition — soon after, the Financial Times reported that Nike was considering the same. Wall Street analysts posited that Apple would be another natural fit as the new owner of Peloton.

Days later, Foley announced that he would step down as Peloton's CEO and that the company was slashing 2,800 jobs, about 20% of its workforce. The company said that the fired employees would receive a free year's subscription to the platform, along with a "meaningful cash severance allotment" and other benefits. Its roster of instructors would not be impacted by the layoffs.

During a conference call following the company's second-quarter earnings, Foley said he took responsibility for what happened at Peloton.

"We've made missteps along the way. To meet market demand, we scaled our operations too rapidly. And we overinvested in certain areas of our business," he said.

"We own this. I own this. And we're holding ourselves accountable," he added.

Experts told BI that the company fell prey to the "bullwhip effect," spending big on logistics while expecting that demand would remain high — when demand cooled, Peloton was left with costly supply chain operations that now require a major overhaul.

Barry McCarthy, the former chief financial officer of Spotify and Netflix, replaced Foley as CEO. In a leaked memo to employees, McCarthy called the layoffs "a bitter pill" but said that the company needed to accept "the world as it is, not as we want it to be if we're going to be successful."

"Now that the reset button has been pushed, the challenge ahead of us is this…… do we squander the opportunity in front of us or do we engineer the great comeback story of the post-Covid era?" he wrote. "I'm here for the comeback story."

Foley severed his remaining ties to the company

July 2022 brought news of 570 additional job cuts, and that August, the company announced yet another round of layoffs, slashing roughly 800 customer-service and distribution team members — and raising prices on some equipment.

In September of that year, Foley stepped down as executive chairman. Cofounder and Chief Legal Officer Hisao Kushi and Chief Commercial Officer Kevin Cornils also left the company.

In a statement, Foley said: "Now it is time for me to start a new professional chapter. I have passion for building companies and creating great teams, and I am excited to do that again in a new space. I am leaving the company in good hands." Lead independent director Karen Boone took over as chair.

Then came the departure of another top executive: The New York Times' DealBook newsletter reported that Chief Marketing Officer Dara Treseder would exit the company that October. Treseder was instrumental in helping Peloton double its membership, which numbered more than 6.9 million at the time, a company spokesperson told DealBook.

Peloton made another round of cuts in October 2022, but McCarthy said he's 'optimistic about our future'

McCarthy told The Wall Street Journal in October 2022 that the company would cut an additional 500 employees, many of whom work on the marketing team, in an effort to cut costs.

The report revealed that Peloton had eliminated more jobs than was previously known. About 600 additional employees had left the company since June through factors like retail store closings and attrition. That brought Peloton's total cuts for the year to over 5,200.

The Journal also reported that McCarthy said the company had only six months to turn things around, which McCarthy later denied in a memo to employees published by Bloomberg. McCarthy said his comments were taken out of context and that he's never felt more optimistic about the company's future.

"There is no ticking clock on our performance and even if there was, the business is performing well and making steady progress toward our year-end goal of break-even cash flow," he said.

Peloton has indeed made several changes since last summer that could help re-energize sales: it launched its long-awaited rowing machine, started selling its gear on Amazon, and inked new deals with Dick's Sporting Goods and Hilton in hopes of attracting new customers.

But 2023 was rough for the company

Peloton's 2023 wasn't a great cause for optimism so far, though.

That May, Peloton reported a wider-than-expected loss of 79 cents per share for the most recent quarter, and it projected its first-ever decline in subscribers.

And in a shareholder letter, McCarthy said the upcoming quarter "will be among our most challenging from a growth perspective."

And things got worse as the company had to issue a massive recall

The New York-based company announced in May 2023 that, in cooperation with the US Consumer Product Safety Commission, it was doing a voluntary recall of the Peloton original Bike sold from January 2018 to May 2023 in the US for about $1,400. Per the company, "the seat post can break unexpectedly during use, creating a potential fall and injury risk." Peloton said that as of April 30, 2023, it had identified 35 reports of seat posts breaking, out of more than 2.1 million units sold.

According to the US Consumer Product and Safety Commission, there were more than a dozen reports of injuries – including a fractured wrist, lacerations, and bruises – caused by seat posts suddenly breaking.

The recall does not impact Peloton Bike+ members nor Peloton original Bike owners in the UK, Germany, and Australia, according to the company.

Peloton now wants to be a workplace benefit for employees

Peloton is working to expand its reach beyond the at-home fitness market. The company is focused on building partnerships with businesses, including hotels, apartments, gyms, as well as education and healthcare facilities, to offer its services and equipment, Bloomberg reported.

Employees at participating businesses will receive discounts on Peloton equipment and free use of the Peloton app, which typically costs customers $24 per month and doesn't need to be used with Peloton equipment.

Peloton's next hurdle is another CEO departure and more layoffs

Peloton announced in May 2024 that CEO Barry McCarthy would be stepping down and that it's laying off around 400 workers, or roughly 15% of its total workforce.

The layoffs are part of restructuring efforts to reduce yearly expenses by more than $200 million by the end of the 2025 fiscal year, the company said. As part of these efforts, the company will also be reducing its retail showroom footprint and rethinking its international approach.

Karen Boone, the chair of Peloton's board, and Chris Bruzzo, one of its directors, will serve as interim co-CEOs. The board has already begun looking for its next CEO, the company says.

Peloton's stock was trading below $3 — a record low — following the news.