Raphael Stevens

An activist is pushing Peloton to fire its chief executive officer and consider a sale as its share price has plummeted, according to a person familiar with the matter.
Blackwells Capital, which has a stake of less than 5% in Peloton, believes Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies, the person said.
To be sure, Foley and other insiders have super-voting Class B shares, which gave them control over 80% of Peloton’s voting power as of Sept. 30, according to a proxy filing.

A person walks past a Peloton store on January 20, 2022 in Coral Gables, Florida.
Joe Raedle | Getty Images

An activist is pushing Peloton to fire its chief executive officer and consider a sale as its share price has plummeted, according to a person familiar with the matter.
Blackwells Capital, which has a stake of less than 5% in Peloton, believes Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies, the person said.

Blackwells is arguing that Peloton is weaker today than before the Covid-19 pandemic. The firm places much of the blame on CEO John Foley, who is also chairman, according to the person, who requested anonymity to speak on the private matter.
Peloton declined to comment. A spokesperson for Blackwells didn’t immediately respond to CNBC’s request for comment. Foley also didn’t return a request for comment.
To be sure, Foley and other insiders have super-voting Class B shares, which gave them control over 80% of Peloton’s voting power as of Sept. 30, according to a proxy filing. That means it would take significant pressure from other shareholders to make any change at the company.
Peloton’s stock is now trading below its September 2019 initial public offering price of $29. It closed Friday at $27.06, giving the company a market cap of $8.8 billion. Roughly a year ago, Peloton’s market value topped out at nearly $50 billion.
This past week, CNBC reported that Peloton is working with consulting firm McKinsey & Co. to look for areas in the business to cut costs, as momentum for its at-home fitness equipment slows. CNBC also reported that the company is planning to temporarily pause production of its bikes and treadmills, on a staggered timeline, to help reset inventory levels. Peloton shares tumbled more than 20% on Thursday on that news.

In response, Foley said in a memo to workers that it isn’t true Peloton is “halting all production.” However, he said that the company must “right-size” its inventory. He also said Peloton is considering job cuts in order to be a more flexible business.
On Thursday evening, the company reported preliminary second-quarter revenue of $1.14 billion and said it ended the quarter with 2.77 million subscribers.
“We are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company,” said Foley, in a statement along with the second-quarter figures.
Among other things, Blackwells is also critical of critical of Peloton’s inconsistent pricing and manufacturing strategies, the person said.
At the end of this month, Peloton will begin charging customers hundreds of dollars more in setup and delivery fees for its Bike and Tread, blaming historic inflation and heightened supply chain expenses. Just last year, Peloton had cut the price of its Bike by about 20%.
The Wall Street Journal first reported on the Blackwells news.

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Capping off a turbulent week, another television character appeared in a popular TV show having a heart attack after riding a Peloton Bike.
This comes about a month after a main character on HBO’s “Sex and the City” sequel series died from a heart attack after taking a Peloton cycling class.
Peloton says it did not give “Billions” permission to use its brand on the show.

Peloton Interactive Inc. stationary bicycles sit on display at the company’s showroom on Madison Avenue in New York, U.S., on Wednesday, Dec. 18, 2019.
Jeenah Moon | Bloomberg | Getty Images

Warning: This article includes some spoilers for the Season 6 premiere of “Billions.”
The hits just keep coming for Peloton.

Capping off a turbulent week for the connected fitness company, which entailed shares plummeting as Peloton said it is considering layoffs and planning to “right-size” production levels as demand for its equipment wanes, another television character appeared in a popular TV show having a heart attack after riding a Peloton Bike.
This comes about a month after a main character on HBO’s “Sex and the City” sequel series died from a heart attack after taking a Peloton cycling class.
In the Season 6 premiere of the Showtime drama “Billions,” main character Mike Wagner suffers a heart attack while riding a Peloton Bike. He recovers shortly thereafter, however, and says later in the episode, “I’m not going out like Mr. Big,” referring to the “Sex and the City” Peloton appearance. (This episode had an early release on Friday, ahead of its scheduled on-air premiere Sunday evening.)
According to The New York Times, the scene in “Billions” was written and shot months before Mr. Big’s “And Just Like That…” scene. The line referencing Mr. Big was added recently in post-production, the report said.
A spokesperson for the show did not immediately respond to CNBC’s request for comment.

Peloton said in a statement on its Twitter account that it did not give “Billions” permission to use its brand on the show.
Peloton’s head of global marketing and communications, Dara Treseder, also said on Twitter: “We did not provide Billions with any equipment. As referenced by the show itself, there are strong benefits of cardio-vascular exercise. Exercise helps millions of real people lead long, happy lives.”
After Peloton’s cameo in “Sex and the City” started going viral online, shares of the company tumbled. Peloton quickly fired back with its own parody ad, starring Mr. Big actor Chris Noth, in which he ended up living and touted the benefits of cardio exercise.
But the rebuttal backfired when sexual assault allegations against Noth surfaced, and Peloton pulled its video from all social media accounts. (Noth denied that he assaulted the two women, saying the “encounters were consensual.”)
Earlier in the week, Peloton pre-announced its fiscal second-quarter financial results after CNBC reported the company planned to temporarily halt production levels of its bikes and treadmill machines, on a staggered timeline, in order to reset inventory levels. CEO John Foley later said in a memo to workers that it wasn’t true that Peloton would be “halting all production.”
The company said revenue for the three-month period ended Dec. 31 will be within its previously forecast range but that it added fewer subscribers than it had expected.
“As we discussed last quarter, we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company,” Foley said in a statement. “This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward.”
After rallying more than 440% in 2020, Peloton shares tumbled 76% in 2021.
Last week, the stock fell back below its IPO price of $29. It closed Friday at $27.06, giving the company a market cap of $8.8 billion.

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Cultivated meats are real animal products made in a lab.
Regulators in Singapore approved cultivated chicken for sale in 2020, while the FDA and USDA are considering it in the U.S.
The manufacturing process is costly, but researchers and entrepreneurs say cultivated meat could help tackle climate change and cut down on animal meat consumption in the decades to come.
Investors have put about $2 billion into the space in the last two years, according to Crunchbase data.

Josh Tetrick, co-founder and CEO of cultivated meat start-up Eat Just, has a vision: He imagines a day when meat grown in a lab is available everywhere from Michelin-star restaurants to street vendors and fast food chains.
But more investment — and regulatory approvals — will be needed to get there. Cultivated or cultured meats are real animal products made in labs and commercial production facilities. Right now, the process is costly, but researchers and entrepreneurs say over time manufacturing will become more efficient and less expensive. If consumers switch to cultivated meat, it could help reduce greenhouse gases from agriculture and ease climate change.

“This isn’t inevitable,” Tetrick said in an interview. “This could take 300 years or it could take 30 years. It’s up to companies like ours to do the real work of building the engineering capabilities … and communicate directly with consumers about what it is and isn’t, and how it can benefit their lives.”
Investors have poured some $2 billion into the space in the last two years, according to Crunchbase data. The year ahead will bring more investment. Eat Just and others are working to win regulatory approval in the United States from the Food and Drug Administration and the Department of Agriculture.
Nick Cooney, managing partner at LeverVC, which invests in the sector, said he expects approval as early as this year.
“There are several companies in this space that are building out large pilot scale facilities to produce cultivated meat products, but to produce at quite significant volumes, that’s going to involve a lot of capex, a lot of steel, and that’s just going to take time,” he said.
Eat Just has had big breakthroughs over the past two years. In Singapore, it received its first regulatory approval in December 2020 for its Good Meat cultured chicken and it has since been approved to sell new types of cultivated chicken there, including chicken breast, tenders and shredded chicken products.

“It is real meat,” Tetrick said. “And instead of needing billions of animals and all the land and the water, and all the rain forests you typically need to knock down to make that happen, we start with a cell. You can get the cell from a biopsy of an animal, a fresh piece of meat or a cell bank. Now, we don’t need the animal anymore. Then, we identify nutrients needed to feed that cell and … we make it in a stainless steel vessel called a bioreactor.”
Eat Just also sells plant-based egg products made from mung beans in stores including Whole Foods and Publix in the U.S., and it employs more than 200 people.
To date, it says, more than 700 people in Singapore have been served its cultivated meat products — a number Tetrick hopes to rapidly scale up as it receives approvals in other countries.

Once approved, Eat Just said it has already laid the groundwork to hit the ground running. The company’s Good Meat division announced a $267 million capital raise last year to build vessels and systems that will ramp up production in both the U.S. and Singapore, where it currently manufactures, with the goal of having that equipment operational in the next two years. It also announced in August it would be building a facility in Qatar, in partnership with Doha Venture Capital and Qatar Free Zones Authority, but much more capital will be needed to build bioreactors large enough to scale up.
According to nonprofit research advocacy group The Good Food Institute, there are more than 100 start-ups working on cultivated meat products, and larger companies are also ramping up their own operations.
JBS, the global protein giant, acquired BioTech Foods in late 2021, investing $100 million to enter the cultivated meat market and build a research and development center in Brazil. The Spanish biotech company is another leader in the cultivated food space, focusing on developing biotechnology for producing cultivated meats.
These developments come as consumers have shown increased concern about climate change and a desire to change their eating habits to fight it. Plant-based meat products have become more ubiquitous, popping up on menus like KFC’s or showing up in the grocery aisle at Target. Cultivated meat could provide Americans with another alternative and could coexist with products made by companies like Beyond Meat and Impossible Foods.
“The world will not get to net-zero emissions without addressing food and land,” said Caroline Bushnell, vice president of corporate engagement at the Good Food Institute.
“Our food system’s role on climate change is generally underappreciated, but industrial animal agriculture is a major contributor,” she said. “Alternative proteins, including cultivated meat, can be a key aspect of how we reduce the emissions from our food system. It won’t be possible to actually to meet our obligations under the Paris Climate Agreement unless industrial meat production goes down.”
Chef Jose Andres, a restaurateur and founder of nonprofit humanitarian group World Central Kitchen, wants to be part of that solution. Last month, he joined the board of Eat Just’s Good Meat division and has pledged to sell its cultivated chicken at one of his U.S. restaurants pending regulatory review.
Promises like that can help move Tetrick closer to his vision. But costs also have have to come down as well.
“A local diner or a big fast food chain is not going to take this if it’s a whole lot more expensive than conventional meat. They’re going to take it when it’s close — or even better, when it’s below the cost. And that’s what we need to fight for,” Andres said.

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Leadership Insights

IKEA is evaluating a furniture rental model after testing it in six markets in 2021.
Renting office furniture has a long history but demand for renting home furnishings is now growing, especially among younger consumers.
Start-ups like Feather and Fernish allow customers to rent furniture for a studio apartment for as little as $105 a month.

shironosov | iStock | Getty Images

Before eventually moving to California, the grandson of one of interior designer Phyllis Harbinger’s wealthy clients who had just graduated from college opted to rent furniture rather than buy it for an apartment he and his girlfriend had found in the New York area.
“They said, ‘We don’t know what we want to do. We don’t want to be married to anything and we want to be sustainable,'” said Harbinger, who is the assistant chairperson of the Interior Design Department at Fashion Institute of Technology. “This generation is very much into that reuse, repurchase mentality to save the planet for them and their kids.”

Renting office furniture has a long history, but demand for renting home furnishings has been growing — particularly among younger consumers who favor a more mobile lifestyle than was common for older generations.
Online furniture start-ups such as Feather and Fernish offer customers the ability to rent furniture for as little as three months at a time, with the option to swap pieces during or at the end of a contract period if they’re in the mood for something different.

Appealing to a young, mobile customer

Feather and Fernish are “responding to the need of people who have plenty of money but no time to go shop for furniture and perhaps also no desire to commit to ownership of large, bulky furniture because they expect to be moving again — and that’s a younger demographic,” says Susan Inglis, executive director of the Sustainable Furniture Council.
The rent-to-buy option that these start-ups offer also appeals to people who don’t have enough money to buy immediately but would like good quality pieces that they can start living with immediately, she said.
Feather’s customers tend to be in their 20s and 30s, living and working in cities. The service is well-suited to people who have just moved or are about to move, live with roommates and move every six months to a year, Ilyse Kaplan, the company’s president and chief operating officer, wrote in an email.

It’s also more affordable for people moving to a new state, which can cost between $4,300 and $4,800, or even moving down the street in most cities, which averages $1,250, Kaplan said. Feather customers “can get set up in a basic studio apartment for as little as $105 a month, or a basic 1-bedroom apartment for $150 a month.”
Feather cited “significant growth” in new residential leases since the start of Covid-19 and the onset of remote and hybrid work, greater financial uncertainty and the need for more flexible living arrangements. “As living conditions have changed in response to the pandemic, we have seen dining room items decrease in exchange for more functional home-office pieces,” Kaplan said.

Renting furniture to be more sustainable

Brick-and-mortar furniture brands like IKEA are also exploring leasing models. For the Swedish retailer, experimenting with renting is part of a grander plan to transition to a circular business model by 2030, with the aim of eventually using only renewable or recycled raw materials, improving design principles to allow for less wear and tear when products are assembled and disassembled, and refurbishing and repurposing used goods or their components.
IKEA began testing a circular furniture subscription model in 2019, but its progress has been somewhat delayed by pandemic-related restrictions, Kicki Murbeck, circular business designer on Ingka Group’s circular innovation team, wrote in an email. Ingka Group is the main franchisee of the IKEA brand with retail operations in 32 markets that represent about 90% of IKEA’s total retail sales.
Building on previous tests in several European countries, the company introduced a limited roll out of a B2B edition called IKEA Rental in six markets during 2021: Finland, Sweden, Demark, Norway, Spain and Poland. Having tested several contract options, including contract lengths, and banking partners, IKEA is evaluating the results before deciding on the next steps, Murbeck said.
Inglis sees the interest in renting higher-quality furniture as a backlash against the growing popularity in recent decades of “fast furniture,” which relies on cheaper materials to cater to a more nomadic lifestyle and often ends up in landfills.
“People are tired of throwaway junk, and the furniture industry as a whole did itself a disservice years ago by trying really hard to move towards furniture that one would throw away,” she said.
Feather, which currently serves ten major markets across the U.S. including New York, Washington, D.C., San Francisco, and Los Angeles, lets customers switch furniture items even during a lease period if their space, needs, or aesthetic preferences change, offering one free swap to each residential customer, and additional changes with a fee. Roughly 14% of its customers currently use the swap option.
“We’re actively working to keep furniture of all kinds out of landfills” by refurbishing and redeploying every item multiple times, Kaplan said, noting furniture currently accounts for roughly 7% of all landfill waste.
While Feather’s furniture is designed with durable materials and a component part system to aid that process, “when pieces are deemed no longer viable for the next customer, our first step is to work with our like-minded partners at FloorFound to find the furniture a new home. If we can’t resell an item, we will donate it via our partnership with Habitat for Humanity,” Kaplan said. 
Inglis said she expects the trend of retailers offering refurbishing services to grow dramatically in the coming years.
There are customer perception challenges to solve before furniture leasing gains more in popularity. IKEA has heard customers seeking longer-term rentals express concern about how to care for products and what the terms and conditions are if something breaks or isn’t treated well. That needs to be clear for both parties.
IKEA is finding that the mind shift needed to fully understand a subscription model is easier for younger consumers to make than for older ones. Gen X and older consumers tend to associate subscriptions with the rent-to-buy model, which historically has made them pay more than when buying upfront but also excludes the total scope of repair, maintenance and return services that retailers are now providing.
IKEA franchisees also will need to develop a digital product tracking system to be able to move away from a linear sales model and circulate products from one customer to another, and scale up the subscription service.
IKEA already sells refurbished and repurposed products in certain markets and plans to expand this as a key element of its circular business makeover. It also opened a second-hand pop-up store in November 2020 in a shopping mall in Eskilstuna, Sweden, dedicated to retailers that sell reused, organic or sustainably produced products. More than 30,000 IKEA products were given a second life at the pop-up store during the first year of the test period and in December 2021 IKEA extended the program for another year.
“The circular furniture subscription service that we are testing isn’t only about the products as such, although they are of course very important, but is also about understanding what the customer needs and wants and to be able to meet those needs that might change over time,” Murbeck said.
—By David Bogoslaw, special to CNBC.com More

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General Motors and Ford are investing $65 billion – $35 billion at GM and $30 billion for Ford – in electric vehicles.
Projections for record auto industry profits and record car prices are helping the cash position of Detroit’s big two.
While the pandemic supply chain issues have been a headwind, both companies have slashed costs in recent years, trimmed lineups of unprofitable models, and have the cash to take on the industry’s biggest technological transformation since its founding.

The cab to a Ford all-electric F-150 Lightning truck prototype is seen on an automated guided vehicle (AGV) at the Rouge Electric Vehicle Center in Dearborn, Michigan, September 16, 2021.
Rebecca Cook | Reuters

Detroit’s automakers have brought a surprisingly conservative financial strategy to making EVs the next vehicle of choice for American consumers.
They’re paying cash.

General Motors and Ford are investing $65 billion between them – $35 billion at GM and $30 billion for Ford – and, so far, don’t propose to borrow any of it. Instead, the most radical change in auto products in a century is being paid for out of the companies’ operating cash flow – seriously reducing the risk to the companies over time, and, for now, boosting their stock prices.
“The short answer is that they are doing it because they can,” said Nishit Madlani, automotive sector lead at bond rating agency Standard and Poor’s. “The popularity of trucks [since the pandemic began] and strong pricing is giving them confidence.”
Detroit’s aggressive investment and conservative financing has been years in the making. It has been aided by $4 billion borrowed by GM in May 2020, and by Ford drawing down a revolving credit line by $15 billion around the same time, moves intended to cushion a feared sales implosion from Covid-19. As sales declined more modestly than feared in 2020 and then began to bounce back in 2021, cash flow remained strong, taking the companies’ stock prices higher and letting Ford repay high-interest debt.
At the same time, both companies held on to cash by suspending dividends and share repurchases. And the companies have cut billions in annual costs, by slashing whole lines of unprofitable sedans, withdrawing from unprofitable markets overseas, and focusing tightly on trucks, which remain the most profitable part of their business.
Put all of this together, and the two biggest native-born U.S. automakers have the cash to take on the industry’s biggest technological transformation since its founding.

Record auto profits, record car prices

“Auto manufacturers are expecting record profits once we get through supply chain issues and chip shortages, which we expect to last most of this year,” CFRA Research analyst Garrett Nelson said. “The existing business is good, and the driver is car prices at a record high.”
The Detroit 2’s financing strategy stands in stark contrast to how Tesla, then a start-up, financed its push into EVs over the last decade. The EV leader repeatedly raised money from the stock and bond markets to pay for its plans, filing paperwork with federal regulators for $10 billion in stock sales as recently as 2020. Tesla’s first EV factory in California was financed with a loan that was federally guaranteed in 2010, when the EV market was nascent, before the company went public or had material revenue.
GM and Ford are ready to spend even more.
“If anything, it will go up from there,” a Ford spokesman said.
The U.S. car market’s bounce back to nearly 15 million units sold in 2021 provided the financial cushion Detroit needed to push forward aggressively, according to Nelson. The collapse was not nearly as large as the one that accompanied the 2008 financial crisis, when the U.S. passenger vehicle market fell to slightly more than 10 million cars and trucks. The brief, shallow dip helped assure that the war chests of the two companies were big enough to meet the need for billions of dollars in new investment, Madlani said.
“We prepared for the known and the unknown,” said the Ford spokesman. “The unknown part was the pandemic. The known was that we needed to be a leader in electric vehicles.”
The sales rebound, while still well below pre-pandemic pace, has translated into $7.8 billion in free cash flow over the nine months that ended in September at Ford. At GM, where automotive operations barely broke even on operating cash flow in the first nine months of 2020, liquidity was still strong enough to let the company spend more than $4 billion on capital expenditures. GM is due to report fourth-quarter results on Feb. 1, with Ford set to announce its results Feb. 3.
Analysts expect Ford to report profits of 42 cents a share on $35.8 billion of revenue, up 75% since the September quarter, according to Thomson Reuters data. GM is forecasted to earn $1.11 a share, down from $1.52 in the third quarter. GM raised its own forecast for the full year in December, saying it will earn $14 billion in earnings before interest and taxes, up from $11.5 billion to $13.5 billion it had previously predicted.
Ford and GM profits have held up, even though U.S. industry unit sales are off the 17 million-vehicle annual pace before Covid, because the companies aggressively cut costs to prepare for the transition, Nelson said. Ford got almost entirely out of the business of making sedans, for example, and GM laid off 4,000 salaried workers in 2019. That’s in addition to factory closings that included GM’s storied Lordstown, Ohio plant, later sold to EV start-up Lordstown Motors.
On top of that, the companies are holding plenty of extra cash as a reserve if their cash flow misses forecasts. As long ago as 2019, analysts who spoke warily of all the money Ford needed to invest in its business respectfully noted that it also had $37 billion in cash and short-term securities. Ford now has $46.4 billion, and generated more than $12 billion in operating cash in the first nine months of 2021.

Ford, GM EV forecasts

Both companies have had plenty to say about financing strategy, and EV planning, at investor conferences in the last year. The common theme: Building Ford’s EV strategy around existing model names like the Mustang and especially the F-150 pickup truck, for which the company has garnered 200,000 pre-orders, is paying off in both customer acceptance and cost containment.
“Within the next 24 months, based on the demand on these products, [we] would be the number two EV automaker, probably close to 600,000 EVs a year globally [from Ford’s current product lineup] and we don’t plan to stop there,” Ford’s North American chief operating officer Lisa Drake told a Goldman Sachs-sponsored investor conference in December. “The complexity of the product in EV space is much less than at [internal combustion engines]. …And that’s going to allow us to be more efficient with our capital and more efficient with the labor and the assembly plants.”
At GM, the EV strategy includes a wave of new vehicles using new and existing nameplates – most recently, the company unveiled a $42,000 electric version of its Chevrolet Silverado SUV – as well as its Cruise joint venture with Honda, Microsoft and other investors to build an EV-centered autonomous-car business.

That has meant manufacturing complexes devoted to EV production that are in progress – or in production – in two Michigan towns and in Spring Hill, Tennessee, with planned battery plants near the sold-off Lordstown plant and in Spring Hill. GM chief financial officer Paul Jacobson said in March the company saves $1 billion to $1.5 billion per plant by converting existing car factories rather than developing all-new ones, which will reach $20 billion to $30 billion by the time GM’s EV effort reaches its full scale.
For now, the challenge is that electric vehicles are much less profitable than the big pickups and SUV that dominate the two companies’ business, Nelson says, but that isn’t likely to last. Nelson says that as battery costs continues to drop and Ford and GM build scale in their EV business, they can surpass the profitability of internal combustion powered vehicles – noting that Tesla is more profitable, per dollar of sales, than Ford or GM’s auto businesses. Ford says its Mustang Mach E is profitable even though it sold fewer than 30,000 units in 2021.
“We do eventually expect to match [internal combustion engine] profitability with EVs as battery cell costs decline and we scale our operations,” a GM spokesman wrote in an e-mail.
At Morgan Stanley, analyst Adam Jonas – a longstanding EV bull – says Ford’s surge which led its stock to outperform Tesla last year, suggests that its EV-focused businesses are now worth about $50 billion, with every 100,000 sales of EVs likely to add $2 to its stock price. But he warned in a Jan. 13 report that hard-to-avoid bumps in the rollout of the electric F-150 and other vehicles will likely cause the stock to dip temporarily later this year.
“From a $25 level, we believe expectations for Ford’s success in EVs, while possible to achieve, are difficult to exceed,” Jonas wrote. More