Peloton’s Bumpy Ride

admin 14 December 2021

0 7 minutes read

Spinning its wheels.Credit…Alana Paterson for The New York Times

Ups and downs

Peloton, the high-end exercise equipment maker, was one of the hottest stocks early in the coronavirus pandemic, gaining five times its value in 2020. But its struggles to hold onto all of those windfall gains — its shares are down more than 70 percent this year — show how challenging it is for stay-at-home stocks like Peloton and Zoom to adapt to the lifting of lockdowns, hybrid working setups and other habits taking shape in the third year of the pandemic.

Peloton’s latest setback came from the “Sex and the City” reboot. The company’s shares are down after a less-than-flattering cameo on HBO’s “And Just Like That,” which debuted late last week and featured a character dying after stepping off his Peloton bike. A jokey ad that revived the character has attracted a lot of attention — all press is good press? — but hasn’t fully reversed the damage to the brand, some company watchers say. (A Peloton spokeswoman told DealBook that its ad responding to the episode came together in 48 hours. She declined to say how much it cost to produce.)

The incident showed that Peloton is having trouble keeping on top of its image, according to Simeon Siegel, an analyst who covers the company for BMO Capital Markets.Yesterday, Peloton told The Wall Street Journal that it had not paid for the bike’s appearance on the show, but had signed off on it and didn’t find out until later how the bike would be used.

Peloton’s C.E.O. recently described the deep-seated issues facing the company, after it reported disappointing earnings last month. John Foley, at a meeting with staff, said that Peloton’s popularity early in the pandemic had made the company “undisciplined.” He said it was now taking a “back to the basics” approach, with actions including a hiring freeze and cost cuts. Analysts expect the company’s losses to top $850 million in its current fiscal year, which ends in June. That’s up from a loss of $190 million in the previous year.

“We worry that as shares reflect reality, we see potential for meaningful price compression,” BMO’s Siegel wrote to clients, a warning that could make other companies sweat, too.

HERE’S WHAT’S HAPPENING

Pfizer says its Covid pill protects against severe disease, including from the Omicron variant. The research results will strengthen the company’s application for the F.D.A. to authorize the pill, known as Paxlovid. If it’s approved, analysts estimate that the drug could bring in $24 billion in revenue next year.

Omicron derails return-to-office plans. Goldman Sachs told its London staff to work from home if they can, DealBook has confirmed. Fidelity has also paused return-to-office plans at some of its offices. Morgan Stanley’s C.E.O., James Gorman, told CNBC that “I thought we would be out of it past Labor Day.” Admitting this forecast for a full return was wrong, he said, “I think we will still be in it through most of next year.”

The Supreme Court refuses to block New York’s vaccine mandate for health care workers. Some doctors and nurses challenged the requirement’s lack of religious exemptions. In other mandate news, some of the largest U.S. hospital systems have dropped their coronavirus vaccine mandates while the federal rule is tied up in litigation; Kroger is eliminating some benefits and imposing a surcharge on unvaccinated employees; and the Air Force dismissed 27 service members for refusing to get vaccinated.

OSHA is investigating the Amazon warehouse collapse in Illinois. The federal agency sent compliance officers to the site where a deadly tornado struck on Friday; Amazon executives defended safety procedures at the facility. At the candle factory in Kentucky where at least eight people died, employees reportedly said that they were threatened with firing if they left their shifts early.

The F.D.I.C. holds a public board meeting amid internal unrest. The meeting today comes as Democratic board members at the bank regulator feud with the Trump-appointed chair over bank merger rules. This morning, 30 progressive groups, including the A.F.L.-C.I.O. and Americans for Financial Reform, called on the F.D.I.C. and the Justice Department to halt bank mergers until new guidelines are finalized.

Stablecoins in the Senate

Congress is talking about cryptocurrencies again today, the second hearing on the topic in a week. This morning, the Senate Banking Committee will call witnesses to discuss stablecoins, the cryptocurrencies pegged to assets like the dollar that are crucial to trading in volatile crypto markets.

The hearings are a sign of rising interest in digital assets, and crypto supporters have been relishing the attention — so far.

The tone was “positive and collaborative” last week in the House, where crypto company C.E.O.s testified about the risks and rewards of the industry, said Craig Salm, chief legal officer at the digital assets fund manager Grayscale Investments. DealBook heard this upbeat assessment echoed widely by crypto investors and executives, including Dante Disparte, the chief strategy officer for the stablecoin issuer Circle, who is testifying today.

But the Senate has invited some crypto critics to testify. The meeting is a “step” toward potential legislation, as financial regulators have raised concerns, said the committee’s chairman, Senator Sherrod Brown, Democrat of Ohio. The witnesses are likely to discuss three big issues:

Reserves: Dollar-backed stablecoin issuers say they hold cash and equivalent assets so that every user could redeem their holdings quickly. But Brown has doubts, citing the spotty history of some issuers. “If you put your money in stablecoins, there’s no guarantee you’re going to get it back,” he will say in his opening remarks.

Concentration and conflicts: Officials worry about a few companies dominating the market. For example, Circle and the exchange Coinbase founded a consortium to develop stablecoin standards, and the companies also have a revenue-sharing agreement. Alexis Goldstein of the Open Markets Institute will say in her testimony that this raises “questions of price discrimination” for users.
Financial inclusion: Crypto supporters, like Circle’s Disparte and Jai Massari, a partner at Davis Polk & Wardwell, will say that stablecoins can speed up payments and remittances, bringing more people into the financial system. But Hilary Allen, a professor at American University Washington College of Law, argues that these claims are unsubstantiated.

Seen and heard

► “Mark, the president needs to tell people in the Capitol to go home. This is hurting all of us. He is destroying his legacy.”

— The Fox News host Laura Ingraham, in a text message to the White House chief of staff Mark Meadows during the Jan. 6 attack. It was one of a series of texts sent by Fox anchors that were read aloud in a Congressional panel investigating the insurrection, part of about 9,000 documents submitted by Meadows to the inquiry. Yesterday, the committee recommended that Meadows be charged with criminal contempt of Congress for defying its subpoena.

► “People have been in a hurry for a long time to do something, but I think, basically, we’re seeing things unfold that allows us to prepare better.”

— Senator Joe Manchin, Democrat of West Virginia, casting doubts on the passage of President Biden’s $2.2 trillion social spending plan before Christmas. The senator spoke with the president yesterday and told reporters afterward that “anything is possible,” but he expressed worries about high inflation. In the face of unified Republican opposition, Manchin’s approval is crucial.

► “The U.S. consumer is spending money, a lot of money, spending at a faster rate than I have ever seen.”

— Brian Moynihan, the C.E.O. of Bank of America, in an interview with The Associated Press. Despite the rise in spending, a recent decline in consumer confidence revealed growing frustrations, he added.

A headline-grabbing digital media merger

Vox Media said yesterday that it would buy Group Nine Media, the latest deal in which digital media groups have decided that they need to bulk up in order to survive, The Times’s Katie Robertson reports. Neither Vox nor Group Nine, which are both private, disclosed the terms of the all-stock deal.

The combination, which will keep the name Vox Media, will create a digital media powerhouse. The deal brings together Vox.com, The Verge, SB Nation and New York Magazine with Group Nine’s properties that include PopSugar, NowThis and Thrillist. Across all of its properties, the new Vox will have some 350 million social media followers and six billion monthly video views.

The poor performance of SPAC deals may have pushed Vox and Group Nine together. BuzzFeed’s transaction, for example, generated far less money than it had hoped for, and its shares have sunk since they began trading this month. Group Nine, which had been considering a SPAC deal, may have seen the trends and decided that combining with another media group was a better route. “Going public may or may not make sense based on market conditions and other factors, and we’ll continue to look at that,” Jim Bankoff, the C.E.O. of Vox Media, told The Times.

The combined Vox could be worth more than $1 billion. The company will have an estimated $700 million in annual revenue, $100 million in pretax profit and about 2,000 employees, making it among the largest media companies in the U.S. BuzzFeed’s shares, even after the recent drop, trade at 14 times pretax profits. Applying a similar multiple to the new Vox gives it a valuation of $1.4 billion, The Times’s Ed Lee calculates.

THE SPEED READ

Deals

China Mobile is preparing for a blockbuster Shanghai listing after it was suspended from the N.Y.S.E.; the Hong Kong insurer FWD is reportedly dropping plans for a New York I.P.O.; and more such moves are expected as China discourages local firms from listing abroad. (Bloomberg, SCMP, NYT)
MGM is selling the Mirage hotel and casino to Hard Rock for about $1.1 billion. (Reuters)
In SPAC news: SoftBank is about to close its first SPAC deal, a $5.5 billion transaction for the A.I. start-up Symbotic; Harley-Davidson will spin off its electric motorcycle division in a deal worth $1.8 billion; and Triller, the TikTok competitor that courts conservative users, is reportedly in talks to go public. (FT, AP, Bloomberg)
After 15 years of infighting, James Brown’s estate, which includes his music rights, was sold for $90 million. (NYT)

Policy

Saule Omarova says senators’ personal attacks during her failed nomination process for the Office of the Comptroller of the Currency were encouraged by banking lobbyists. (NPR)
California regulators have proposed raising fees on owners of rooftop solar panels. (NYT)
The Labor Department is investigating a whistle-blower’s claims about Apple’s treatment of employees. (NYT)
Penguin Random House told a court that its acquisition of Simon & Schuster would be a boon for the publishing industry, as the Justice Department’s tries to stop the $2.2 billion deal. (NYT)

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