Peloton fires over 2,800 employees as founder resigns as CEO; quarterly loss climbs to nearly $0.5 billion

The end has finally come for Peloton. The fitness startup that was once valued at $50 billion announced today it’s firing over 2,800 employees due to an ongoing downturn in the company’s business. The number represents about 20% of Peloton’s corporate workforce.

As part of the severance plan for the over 2,800 laid-off employees, Pelton is offering a strange benefit: A membership to Peloton. In a statement, the company said:

“The Peloton monthly membership will be complimentary for impacted team members for an additional 12 months,” Peloton said in its press release about the layoffs. That’s in addition to a “meaningful cash severance allotment” that’s determined “based on job level and tenure” with the fitness company, alongside several other benefits.

In addition to the layoff, Peloton also announced that the company founder and CEO John Foley is stepping down from his position and become executive chairman. Former Spotify and Netflix CFO Barry McCarthy will replace Foley as the new CEO. The resignation of Foley as the CEO is a victory for activist investor Blackwells Capital. The firm had campaigned for his departure.

Foley, a former Barnes & Noble Inc. e-commerce executive and cycling enthusiast, founded Peloton after posting a video to Kickstarter in 2013. At its peak, Peloton was valued at $50 billion before losing 75% of its value in just one year. Last week, the company was valued at just over $8 billion, based on Friday’s official market close of $24.60 a share.

Commenting on the announcement, Foley said, “Since founding Peloton a decade ago, we’ve grown this brand to engage and motivate a loyal community of more than 6.6 million Members. I’m incredibly proud to have worked with such talented teammates over the years who have helped me build Peloton into what it is today, and I’m confident that Barry is the right leader to take the company into its next phase of growth. He’s not only recognized as an expert in running subscription business models and helping category-leading digital streaming companies flourish, but he has also had tremendous success in partnering with founder CEOs at other brands. I’m excited to learn from him and work alongside him as Executive Chair.”

Peloton was one of the best-performing stocks since the pandemic began in 2020 as gym closures boosted demand for their home fitness products. But with gyms now reopening they’ve seen demand fall off a cliff. But Peloton’s demise would come a year later. Peloton’s business took a huge hit as gyms reopen and vaccines become available. Peloton saw the demands for its products fall off a cliff. Its stock price lost about two-thirds of its value since its peak and its path to profitability is now more uncertain than ever.

According to internal documents obtained by CNBC, Peloton is temporarily halting production of its Bikes, treadmills as demand wanes and the company looks to control costs. A Peloton spokesperson declined to comment.