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When Peloton went public in September 2019, many of its employees discovered that they would become millionaires overnight.
Months later, as the pandemic brought the world to a standstill and people looked for ways to stay fit at home, the value of the stationary bike company soared even higher, reaching in months what it had previously expected to take years.
After toasting their successes with a seafood and champagne feast at Hudson Yards in New York City, Peloton began spending exorbitantly to meet customer demands and stay ahead of the market. The company went on a hiring spree, investing hundreds of millions in a production facility in Ohio and spending up to $500 a mile to deliver bikes to customers in a timely manner.
But things started to go wrong when the pandemic ended and people started going back to their old gyms. After stock prices peaked at $167 in December 2020, two years later they sank to around $13 a share and traded at a net loss of around $2.83 billion in 2022 alone.
Less than three years after his stunning IPO, Peloton founder John Foley stepped down as CEO, succeeded in February 2022 by former Netflix and Spotify executive Barry McCarthy. Since then, McCarthy has fought to turn the company around.
Peloton sought to bring spin exercise classes into customers’ living rooms
Foley, a former Barnes and Noble executive, started Peloton in 2012 with the goal of providing convenient alternatives to popular spin classes for wealthy clients.
The result was a sleek stationary bike that came with spin classes that customers would participate in remotely.
Over the years, Peloton grew a devoted following, and in 2019 employees made millions when its IPO earned the company a $7.2 billion valuation.
“It seemed like nothing could get in the way of all that,” said a former employee who attended a lavish IPO party. CNBCthat kicked off years of unpredictable success when the pandemic launched company value into the stratosphere.
As the company began opening its coffers to meet demand, employees said leadership told them their success was only going to increase.
‘There was a lot of blind trust. We all said, okay, let’s go,’ the same former employee told CNBC. “They always had this blind optimism where they said, we’re going to the top.”
The company began hiring quickly and rolling out new products, while spending thousands of dollars to get bikes to customers as quickly as possible.
Thousands were spent on hazard pay for delivery drivers, and up to $500 per mile was spent in certain regions delivering bikes, excluding the price of importing products from their overseas factories.
By November 2020, sales were up 232 percent over the previous year, and that December, at the height of the holiday season, it reached its all-time high for stocks.
“Most of us weren’t naive to the fact that, especially in New York, there were people out there in refrigerated trucks because they didn’t have enough morgue space, but at the same time, we’re looking at our Morgan Stanley accounts and now all we’re worth, you know, millions,’ another former employee, whose net worth reached $5 million while working for Peloton, told CNBC.
“I don’t think any of us were encouraging the pandemic to continue, but as long as it continued, it was obviously good for business and it was good for a lot of people’s bank accounts.”
Peloton co-founder John Foley celebrates with employees during the company’s IPO
John Foley stepped down as Peloton CEO last year after stock prices plummeted.
But the pandemic that gave the company so much also began to take its toll.
Despite the company’s logistics expenses, some customers would have to wait months for equipment they paid thousands for.
In response, Peloton hired more people and spent more getting bikes to customers.
To save on international shipping, the company invested $400 million in building a factory in Ohio to manufacture its products.
“They said, we have so much money, we are unstoppable,” said one former employee. “We just have to deliver the bikes, we just have to get the bikes to the homes, we just have to do this.”
So many people were hired that some employees said they had nothing to do.
As the company continued to pour money into its booming sales, the severity of the pandemic began to lessen, normal life began to resume, and people began returning to gyms as vaccines became widely available.
Sales slowed, revenue declined, and by December 2021, its shares were worth just $35 a share from their high of $167 a year earlier.
“We were trying to catch up and spending, spending, spending to catch up, and when we finally caught up, demand dropped,” said one former employee. “Over time, we saw how the company responded to the pandemic, and then we misinterpreted the pandemic. It was like, wow, it feels like we were sold down the river.
By March 2022, Peloton had net losses of $757.1 million, and by the end of its fiscal year in June, those losses had reached nearly $3 billion.
Former Netflix and Spotify executive Barry McCarthy became CEO of Peloton last year
Peloton has tentatively begun to turn around since McCarthy took over as CEO
As losses grew to staggering levels, Foley stepped down from his leadership position and was succeeded by McCarthy in February 2022.
It began cutting jobs, closed the Ohio factory project, outsourced its logistics operations to third-party companies, and announced plans to close more than a third of its retail stores worldwide.
Despite the massive cutbacks, employees said they felt they were finally in responsible hands under McCarthy’s leadership.
“He seemed like the complete opposite of John,” a former employee told CNBC. “I think everyone was like, OK, this is a really legit businessman with a strong background.”
‘We all had hope. I was certainly hopeful with his insight and experience, but I knew he was going to come up with some very tough decisions.”
McCarthy’s tactics have been promising, with the company’s shares rising 26 percent in February following promising second-quarter numbers.
The company also began to focus its efforts on its digital classes, as it found that about half of its subscribers were using the platform on non-Peloton bikes or equipment.
DailyMail.com has reached out to current and former Peloton employees for comment.