Peloton's PR Pileup: 10 Things We Learned This Week

This week has been a mixture of the serious and the ridiculous, from US inflation and pension fraud to a crypto heist and the wheels coming off Peloton

James Gard 11 February, 2022 | 12:49AM Sunniva Kolostyak
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Peloton founder John Foley

Peloton Founder On His Bike

High drama at lockdown winner Peloton (PTON), which has hit a really steep incline in recent months. Their pricey bikes and treadmills were the aspirational choice for stuck-at-home hedge fund managers and their ads featured telegenic trainers shouting inspirational messages (“Keith in Basingstoke, you've really smashed it!”). A Christmas ad showing a wife receiving a Peloton backfired and sparked much social media mockery.

Now founder John Foley (pictured at the IPO) is to step down after investor Blackwells Capital inserted a large stick in his spokes. The criticism got rather personal in a presentation – point one being “CEO John Foley is right to be insecure about his capabilities and qualifications”. Shares soared amid speculation that a big beast like Amazon or Nike would buy it. The near-3,000 Peloton staff to be laid off were less than happy, despite being offered a one-year free membership as a parting gift. Disgrunted staff stormed a virtual meeting to announce the new boss. (Hat tip to Liam Killingstad [@LiamKillingstad] for his detailed thread of the Peloton takedown).

The man tasked with turning Peloton around is new chief executive Barry McCarthy, a respected tech executive with experience as CFO of Netflix (NFLX) and Spotify (SPOT). Speaking of the streaming service, the controversy over Joe Rogan has been dialled down a notch this week, but the newsflow continues. Spotify is to sponsor Spanish football team Barcelona, which involves a strip update of course, but also a change of the name to the venerable stadium, which will now be known as “Spotify Camp Nou”. Previous sponsors include Unicef, Qatar Airways and Japanese ecommerce firm Rakuten.

UK Needs a Shot in the ARM

Sticking with tech, former UK crown jewel ARM Holdings could end up being listed in New York after chipmaker Nvidia failed to buy ARM from Japan’s SoftBank. Cambridge-based ARM was taken private in 2016 by SoftBank for $32 billion in the wake of the Brexit vote, much to the chagrin of UK investors large and small, who had seen some amazing returns from the company that supplied chips to Apple et al.

Nvidia’s 2020 tilt at ARM would have valued the UK accompany around $40 billion, which is now worth $80 billion given the rise in Nvidia in that two years. The US is the favoured place to list semiconductor stocks, but UK tech investors would give their right ARM for an IPO like that in London. Reuters reports that Hermann Hauser, ARM’s co-founder, is holding out for a dual listing between the LSE and NYSE, which may soften the blow for UK investors.

Wheels of Justice

From exercise bikes to motorbikes, the former owner of Norton Motorcycles has been convicted of misusing pension fund money. Stuart Garner could face up to two years in prison after allowing Norton pension fund money to be invested into his own businesses, breaching UK pension rules. The classic UK bike brand fell into administration in early 2020, meaning £14 million of pension funds money was owed to 227 holders of units in the Commando, Dominator and Donington schemes. The Pensions Ombudsman ruled in 2020 that Garner had acted dishonestly and ordered him to repay the money.

Crypto Crocodile

The Twittersphere had some fun at the expense of crypto influencer, “rapper” and “journalist” Heather Morgan, who is accused along with husband Ilya Lichtenstein of stealing nearly 120,000 Bitcoin from currency exchange Bitfinex. At the time the transactions were worth $71 million, but they have now ballooned to over $4 billion. Morgan had a rapping alter ego, “Razzlekhan”, and described herself as the “Crocodile of Wall Street”.

She had a few bylines in Forbes too, with articles on “imposter syndrome” and “tips to protect your business from cybercriminals”. Journalists operate under a strict code of omerta, and are forbidden from criticising a fellow hack's work, so I will pass no comment. Also this week and definitely separately, Bitcoin exchange Binance announced it is to take a $200 million stake in media group Forbes as part of a SPAC deal. Awkwardly, two years ago Forbes accused Binance of deceiving regulators and the exchange sued the media group for defamation.

Oil's Awkward Rally

And speaking of controversial stocks; Spotify and Peloton were investor darlings but are now finding the going much tougher. Meanwhile, oil and gas companies, 2020's laggards, have have sped off in the opposite direction. From being everyone's least favourite companies for ESG reasons, these firms have been enabled by certain global events to evolve from oil-covered ducklings to still oil-covered swans with stellar performance. However, does this mean these companies are worth buying? We have rounded up all the top performers of the year so far, dominated by stocks with a high ESG risk. And in case you're keen to find out if any other companies did well too, we have applied an ESG filter to one of our lists as well.

Don’t Look Up

Not interested in oil stocks? Did you per chance watch Netflix special Don’t Look Up this Christmas and have you been struggling with existential dread ever since? Fear not. We have collated all 600 funds that you could invest in to fight climate change – and we promise that the list is as least as star-studded as the film (even if it doesn't contain Jonah Hill’s Birkin bag). And better yet, these funds could help you “just look up” and sleep a little better at night. We suggest you "look down" at our extensive list of rated funds from the around the globe with the help of our interactive table, built by Morningstar's Lewis Jackson and Sunniva Kolostyak.

US Inflation at a 40-Year High

In other chilling news, inflation remains on everyone’s agenda in February too, not least in the US. The Federal Reserve is under real pressure to act on soaring prices and there has even been talks of an emergency rate rise, and we can certainly expect a hike in March. Could it be as much as 200 basis points? The market is really worried now and there's a growing feeling that the Fed is behind the (yield) curve here (even the normally ultra cautious Bank of England has raised rates twice so far). Data journalist Lauren Solberg has served up seven charts detailing the finer details of the big CPI rise.

What Happens if Russian Invades Ukraine?

Continuing down the rabbit hole of existential dread – what happens next with Russia’s threat of a Ukraine invasion? And not to talk about oil again, but will war lead to sanctions, driving already excessive crude prices further towards the sky? Not according to our analyst Dave Meats. He thinks leaders are facing a Catch-22: oil sanctions severe enough to hurt Russia could cause economic misery at home. But there are lessons from history to heed too - conflict doesn't necessarily lead to a huge oil spike, which, frankly, is the last thing the world needs with inflation taking off. A conflict avoided could take the heat out of oil prices too.

“While the Ukrainian situation seems more intense than past crises, similar conflicts in the past have not resulted in material energy flow disruptions, and we don't expect them to do so this time,” he says.

Investing for Olympic Returns in China

The Winter Olympic Games are well under way in Beijing and Norway is so far leading the medal table with 14 medals, 6 of them gold. And with the world’s eye fixated on China (and its dystopian ski slope), we have assembled the ultimate guide to how its market works, what terminology investors need to know. It's a rapidly evolving market with much that is baffling to outsiders - and even passive investors need to know which index they are following. Fact of the day: you may be surprised to learn that the Beijing Stock Exchange only started trading a few months ago.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is content editor for Morningstar.co.uk