Peloton Shares Tumble Amid Treadmill Recall

Shares of Peloton Interactive Inc (NASDAQ: PTON) tumbled on Wednesday, after the company recalled its treadmill products following a number of consumer safety incidents.

Peloton was forced to reverse its earlier position that its devices were safe if used properly, after more than 70 incidents regarding safety issues were reported. The company’s stock fell by more than 15%— the most in nearly six months, after a joint statement issued by Peloton and the US Consumer Product Safety Commission, announced a recall affecting the Tread+ and Tread treadmill models.

The Tread+ machine, which comes with a price tag of over US$4,200, was the subject of a warning from US regulators back in April as well as an investigation by the safety commission. Originally, Peloton regarded the commission’s concerns as “misleading and inaccurate,” adding that consumers should not stop using the Tread+ model as long as they properly follow all safety instructions.

However, on Wednesday, Peloton CEO John Foley walked back the previous comments. “Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+,” he said. “We should have engaged more productively with them from the outset. For that, I apologize.

According to the safety commission, the recall of the Tread+ follows a 72 reports of serious incidents involving adults, children, pets, and even objects being pulled underneath the treadmill, with one incident resulting in the death of a child. The Tread treadmill, which costs around US$2,500 is being recalled due to the device’s screens becoming loose and falling, potentially harming the user.

The safety commission’s filings suggest that approximately 125,000 Tread+ models have been sold as of current, while sales of the Tread model sit at around 1,050 units. The relatively cheaper model recently launched in the US market through limited sales channels, and was due for a broader US launch at the end of the month.

The latest recall is also not the first for Peloton. In October 2020, the company was forced to recall pedals on about 27,000 of its stationary bikes sold between 2013 and 2017 after numerous consumers reported leg injuries from parts falling off. Peloton’s products have become popular amid the pandemic, as lockdown orders forced consumers to revert to at-home exercises.

Information for this briefing was found via the U.S. Consumer Product Safety Commission. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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