Headquartered in New York, New York, Peloton offers interactive, internet-connected exercise equipment, including bicycles and treadmills designed and marketed for use in customers’ homes, along with subscriptions that allow users to access exercise classes while using their Peloton equipment or with their own home equipment. For most of 2020 and 2021, as the COVID-19 pandemic and related stay-at-home orders and business closures largely kept individuals out of the gym, the demand for in-home exercise options increased dramatically. Against that backdrop, in the months leading up to the Class Period, Peloton experienced unprecedented demand for its products and services. The complaint alleges that, throughout the Class Period, Defendants repeatedly, falsely assured investors that the Company’s positive results and growth would continue after the pandemic. In addition, during the Class Period, Defendants made false and misleading statements about the amount of inventory that Peloton held, and touted the Company’s ability to keep its inventory levels in line with substantial, sustained demand. As a result of Defendants’ misrepresentations, Peloton common stock traded at artificially inflated prices during the Class Period. The truth about the plummeting demand for Peloton’s products was revealed through two disclosures. First, after the market closed on August 26, 2021, the Company disclosed that it had identified a material weakness in its internal controls over financial reporting “with respect to identification and valuation of inventory.” In its Annual Report filed with the SEC on Form 10-K on August 27, Peloton explained that “this material weakness arose because our controls were not effectively designed, documented and maintained to verify that our physical inventory counts were correctly counted and communicated for reporting in our financial statements.” However, at the same time that Peloton disclosed the weakness in its internal controls, Defendants continued to misrepresent and conceal the unsustainable nature of Peloton’s financial results and growth post-COVID, issuing guidance of $5.4 billion of total revenue for fiscal year 2022, representing 34% year-over-year growth. Then, on November 4, 2021, the Company announced second quarter financial results that fell far short of expectations and reduced its total revenue guidance for fiscal 2022 by a staggering $1 billion. Peloton further disclosed that inventory had skyrocketed to $1.27 billion, 91% of which comprised “finished products” that the Company still held. On Peloton’s November 4 earnings conference call with investors, Defendants admitted that Peloton overestimated demand and underestimated the impact of gyms reopening as the pandemic subsides. As a result of these disclosures, Peloton’s share price declined precipitously.
Eligible SecurityIDs: 70614W100, US70614W1009, BJ7WJS2
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