Peloton Lawsuit Dismissed

By Jonathan Stempel

NEW YORK (Reuters) – Peloton Interactive (NASDAQ:PTON) won dismissal of a lawsuit claiming it defrauded shareholders by concealing declining demand for its home exercise equipment, which surged after the COVID-19 pandemic began, as vaccines became available and gyms reopened.

In a decision issued on Monday night, U.S. District Judge Andrew Carter in Manhattan stated that several optimistic statements from Peloton about its future were accompanied by “very detailed warnings,” indicating that lockdowns could end and routines could return to pre-pandemic norms.

Carter did not determine whether Peloton intended to defraud shareholders, noting that the alleged false statements were “entirely consistent” with the company’s actual financial results.

The proposed class action was led by Robeco Capital Growth Funds SICAV – Robeco Global Consumer Trends, an investment company based in Rotterdam, Netherlands.

Attorneys for the shareholders did not immediately issue comments on Tuesday, nor did Peloton and its legal team.

Shareholders, whose losses occurred between February 5, 2021, and January 19, 2022, aimed to recoup losses as Peloton’s stock price decreased by over 80%.

Challenged statements included former CEO John Foley’s November 4, 2021, claim that Peloton was “well-equipped” for the holiday season, despite cutting its full-year revenue forecast and indicating that 91% of its inventory was unsold.

Although Peloton’s stock price dropped by 35% the following day, Judge Carter noted that the company ultimately met its quarterly sales forecast. He added that anecdotal evidence suggesting some staff missed sales quotas “do not support an inference of falsity.”

Peloton reported its first sales increase in nine quarters in August, three months post an announced 15% workforce reduction. Since peaking in January 2021, its stock price has plummeted over 97%.

The case is Robeco Capital Growth Funds SICAV – Robeco Global Consumer Trends v Peloton Interactive Inc et al, U.S. District Court, Southern District of New York, No. 21-09582.