John Foley is a man who knows how to describe himself. He’s 53 and a living example of the things that can go wrong with business. Shares can rise or fall, but he is a testament to this. He was once a stock-market darling. He co-founded At-Home Fitness and led it for over a decade.
Not anymore. Foley’s fortune was $1.9bn. Peloton valued at $58bn. Peloton has a market cap of $1.74bn today, and Foley revealed that his fortune is gone. “You know, I used to have a lot of cash on paper. Unfortunately, not [in the bank]. I’ve lost my money. “I’ve sold almost everything I own in my life.”
The Covid was the force behind this rollercoaster. Or, rather, it was the discovery of vaccines and the subsequent outbreak of the virus that brought about its end.
Pelton was 8 years old in 2020 when Covid struck. The idea of using sleek, specially-designed spinning bikes to exercise and enrolling in classes online was not gaining traction. The concept appealed to those who were cosmopolitan and did not have time to go to the gym.
The firm’s advertisement, which showed a woman pedaling furiously in order to impress her husband with a beach-body while on vacation, did not help matters. Peloton was able to shine when the world entered lockdown.
Users of health clubs were left without the ability to exercise. Peloton demand exploded. Peloton went from being a niche product to becoming a celebrity favorite. The Obamas and Usain, Richard Branson, Lizzo Jill Biden…the list of famous clients grew. Because they owned them, we wanted one too.
The bike wasn’t cheap. The bike cost more than £1,350, plus a £200 charge for delivery and £125 for shoes fitted. It also included a £30 monthly subscription to the online classes. The online classes took up a large amount of space.
The orders kept coming. Foley and his co-workers could not believe the luck they had. Likewise, this is where the problem began.
The bikes were not produced quickly enough. The reports of delays piled up. The expansion plan was launched, but it could not be completed on time. This only served to create problems for the future, should Peloton go sour.
The music used in classes was accompanied by a request for large payments.
Safety concerns and technical issues prompted the recall of certain machines.
Peloton, which had been receiving rave reviews, was now heavily criticized. The classes were too repetitive, the delivery was poor, there was a lack of service, and it was expensive.
In the And just like that spin-off, two characters suffered heart attacks while riding their Pelotons. After an episode that showed one of the heart attack, Peloton’s share price plummeted by a massive 11,5%.
Peloton’s appeal was also over once the pandemic ended. Peloton was left with an untold amount of stock after the gyms reopened. People were trying to sell their bikes on reselling sites. Class subscriptions have been cancelled.
The company reduced its prices and expanded into other exercise equipment. Peloton’s upmarket cachet was not enhanced by this.
Foley started an online bespoke rug maker. Foley sold two Hamptons homes. He has money – but not much. He still owns his holiday home, a Manhattan townhouse and shares in Peloton. He is still in a much better financial position than many.
His rise and fall was dramatic, as well as that of Peloton. It’s a consolation that he wasn’t alone.
Zoom is another company that has experienced a meteoric rise in Covid only to fall rapidly into a new norm. Zoom was worth $168bn when it peaked, but today, its value is $21.5bn. Zoom dominated the virtual meeting software market at first. Microsoft quickly caught up with its Teams product. Zoom is still a strong business. Most online meetings use either Teams or Zoom, and there’s room for both.
Digital platforms and e-commerce enjoyed a good boom, but then settled back down. Etsy was one such platform, which sold goods made by artisans. During Covid people made handmade products and sold them from their homes. As customers browsed and shopped online for hours, sales increased. Etsy was valued at $6.4bn today, compared to $35bn when it hit the stock exchange.
The popularity of e-gaming also grew. Publishers who achieved record profits and sold more books, as well as game creators enjoyed a great Covid. People were looking to be entertained at home.
Foley should take solace in the fact that Peloton was not alone. Ironically, Moderna was one of the companies that chased the vaccine which signalled Foley’s demise. The market cap of the biotech leader jumped to $172bn in the race to create vaccines. Moderna would cost $29bn if purchased today.
Foley is the most well-known former Covid billionaire, but he’s not the only one. What was the purpose of those “wise saws”? Shares can rise or fall. Don’t make assumptions before the chickens hatch.
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