Peloton co-founders John Foley, Hisao Kushi announce departure
Yahoo Finance Live anchors discuss Peloton co-founders John Foley and Hisao Kushi departing from their positions as the company aims to reshape its future.
Video Transcript
[AUDIO LOGO]
BRAD SMITH: It's an uphill pedal for Peloton. The stock is moving lower by about 5.7% here in premarket trading. This is after the fitness brand announced the departure of cofounders John Foley and Hisao Kushi in another shakeup, as CEO Barry McCarthy pushes to stage a comeback for the company.
Now, Foley's resignation, that takes place immediately. Kushi will remain in his position until October 3. This just the latest slate of some of the executive changes.
The time that we've seen this all take place in, though, is really remarkable, as much of this was set on earlier this year. You had some of the turmoil within the company. Everything from some of the supply chain issues that they've had to navigate that's had them halt some production on specific lines.
Even to the pricing mechanisms that have been wildly out of touch with what consumers, who are navigating a broader inflationary environment, what they are willing to or able to pay for some of those connected devices and for the connected device usership also going down. That was typically one of the biggest areas that they would use for a marketing selling point.
So all that considered, Barry McCarthy going to be much more stern with even what they report out to the Street, and going forward from here with some of these changes. It's clear that the board is firmly behind Barry, not so much behind some of the legacy leadership.
JULIE HYMAN: Well, to be clear, John Foley still, I believe, owns a pretty sizable stake--
BRAD SMITH: He does, yeah.
JULIE HYMAN: --in the company, right? And Foley-- it's interesting you use that word stern, right? Because Sozz, who isn't here today, but has done a lot of talking in the company, reporting on the company, has really drawn the contrast between these two leaders.
BRAD SMITH: Yeah.
JULIE HYMAN: McCarthy is a much more conventional leader, a more stern leader in this cost-cutting mode. Foley, a much more sort of outsized personality who helped lead the company in that big, initial growth push.
So it makes sense at this time at this phase of the company that he would be stepping aside. We don't know what happened behind the scenes to get him to do so. But it's interesting how McCarthy is now sort of setting the stage for the next phase at the company. He also spoke at an investor conference yesterday. And he said, we slashed pricing in order to survive. But he said, that worked.
BRAD SMITH: Yup.
JULIE HYMAN: Now, they're gonna get to the next place. We've stopped the bleeding, he said. I don't need to run it for cash anymore. Remember, the company said he's gonna cut 3,600 jobs--
BRAD SMITH: Yeah.
JULIE HYMAN: --over the course of the year. So now, that they've stopped the bleeding, stabilized it, the question is now, do they get that growth from an Amazon partnership, for example, which we were skeptical of when that was announced? You know, where does that next phase of growth come? Even if it's not the same magnitude of growth that they saw.
BRAD SMITH: Right.
JULIE HYMAN: Like, any growth. Where-- what does that now look like for Peloton?
BRAD SMITH: You know, it kind of begs this larger conversation that we continue to revisit time and time again when you see a founder-CEO kind of finally step away from one of those core positions. And "Harvard Business Review" has looked at this and studied companies from Google to Microsoft, some major tech companies.
And of course, Peloton in its own right one of those major [? fit-tech ?] companies that's out there. And there is the preliminary results that they had seen that indicate founder-CEO leadership is associated with a almost 10% higher company valuation at IPO, but then it diminishes very quickly thereafter that with the value of having a founder in that top seat rapidly deteriorates after.
The value added by a founder-CEO essentially dwindles to, get this, zero approximately three years after firms go public. And so Peloton we're about three years after they've gone public.
JULIE HYMAN: That is very interesting. Of course, there's always exceptions to the rule.
BRAD SMITH: There are, yeah.
JULIE HYMAN: I think of Meta, for example, Facebook.
BRAD SMITH: Yeah.
JULIE HYMAN: But look at you bringing up the "HBR" citation there. I like that, getting a little academic here--
BRAD SMITH: Well, you know--
JULIE HYMAN: --this morning.
BRAD SMITH: --for those of us who didn't go to Ivy League, we got to get as close as we can.
[LAUGHTER]
You know?
JULIE HYMAN: Amen.
