Peloton Stock Declines Amid Recall and Security Concerns

Peloton shares are currently experiencing a significant downturn, with a decrease of approximately 13.6% as of this report. This follows the company’s announcement of a treadmill recall and reports from TechCrunch detailing an unresolved security vulnerability concerning user data.

Pandemic-Driven Growth and Subsequent Decline

During the pandemic, Peloton’s stock value saw substantial growth. The shift towards remote work and home fitness, spurred by the spread of COVID-19, created a favorable market for the company’s products.

Beginning 2020 at around $30 per share, Peloton’s stock peaked at over $150 per share by the year’s end.

Currently, following a loss of over $13 per share, Peloton equity is valued at $83.50 per unit.

Treadmill Recall and Safety Concerns

The company’s decision to recall both the “Tread+” and “Tread” treadmills is accompanied by a directive for owners to “immediately cease use and contact Peloton for a complete refund or alternative resolution.”

This action, including halting sales and financing a full recall, was prompted by the tragic death of a child involved in an incident with one of the treadmills, alongside reports of other injuries.

CPSC Involvement and Initial Dispute

The American Consumer Product Safety Commission (CPSC) has acknowledged and accepted the recall and cessation of sales. This agreement followed “weeks of extensive negotiation and effort.”

Previously, the CPSC had cautioned consumers about the potential hazards of the Peloton Tread+ exercise machine, citing multiple incidents involving injuries to small children and a pet.

Peloton initially contested the CPSC’s statements, expressing concern over what they deemed an “inaccurate and misleading” press release. They maintained that the Tread+ could be used safely if all warnings and instructions were followed.

Brand Damage and Public Perception

The company’s subsequent reversal is proving to be a significant public relations setback. The dispute with the CPSC regarding potential obstruction of their investigation created a negative image.

Taking earlier action may have been less damaging to the brand than the current situation.

Data Security Breach

In addition to the recall, TechCrunch reported a security flaw discovered by Jan Masters, a security researcher at Pen Test Partners. Masters found that unauthenticated requests could be made to Peloton’s API to access user account data without proper authorization.

This poses a considerable risk, particularly given the presence of high-profile political figures among Peloton’s user base, elevating the issue beyond a typical consumer data breach.

Masters had previously informed Peloton about this vulnerability.

A Difficult Day for Peloton

Considering the child’s death, the contentious exchange with critics, the extensive recall, the product line’s sales suspension, and the privacy breach, today represents a challenging day for Peloton. Despite these issues, the author intends to continue using their Peloton equipment, albeit with reservations regarding the company’s leadership.