Peloton Interactive must face a lawsuit claiming it defrauded shareholders by masking excess inventory of its home exercise equipment as the worst of the COVID-19 pandemic passed, a divided federal appeals court ruled on Wednesday.
Reversing a lower court ruling, the 2nd U.S. Circuit Court of Appeals in Manhattan said shareholders can try to prove that the maker of stationary bikes and treadmills made three false and misleading statements that inflated its stock price.
The statements included former Chief Executive John Foley’s claim in an August 26, 2021 earnings call that a $400 bike price cut was an “absolutely offensive” strategy to boost sales, rather than a defensive strategy to counteract weakness.
They also included two warnings in Peloton regulatory filings of hypothetical risks regarding “excess inventory levels.”
Circuit Judge Steven Menashi said shareholders offered evidence that the price cut was actually a defensive move to clear out three months of inventory, and that the risks of excess inventory had already materialized.
Source: Peloton must face shareholder lawsuit over post-pandemic outlook | Reuters