Platoon stock slips on bike seat recall

Platoon stock slips on bike seat recall

Shares of Peloton (PTON) fell on Thursday after the company recalled more than 2 million bikes for repair.

In a joint statement with the U.S. Consumer Product Safety Commission (CPSC) on Thursday, Peloton announced a “voluntary recall” of the original Peloton bike sold from January 2018 through May 2023.

“The seatpost may break unexpectedly during use, creating a potential risk of falling and injury,” the statement read.

Peloton received 35 reports of the seatpost breaking and detaching, which resulted in 13 injuries, including a broken wrist, lacerations and bruises, according to the CPSC statement.

Platoon shares fell more than 7% on the news. Shares are now down nearly 40% from a month ago. The company recently warned of a potential drop in subscribers in the current quarter.

The issue is isolated to the original Peloton model bike and can be identified by its PL-01 model tag on the bike, Peloton said. The company offers free replacement seats that can be installed at home.

“Consumers should immediately stop using the recalled exercise bikes and contact Peloton for a free repair,” according to the CPSC.

The encore isn’t Peloton’s first encounter with the CPSC. In May 2021, Peloton recalled 125,000 Tread+ treadmills, following the death of a child and dozens of incidents reported to CPSC.

Peloton shares fell 15% on the news in 2021. Peloton paid a $19 million fine for the fatal treadmill incident, one of the largest civil penalties ever paid to the CPSC.

Part of the payout came because Peloton responded to customer complaints but did not notify the CPSC, according to a statement from the agency.

A Peloton exercise bike is seen after the ringing of the opening bell for the company’s IPO at the Nasdaq Marketplace in New York City, New York, U.S., September 26, 2019. REUTERS/ Shannon Stapleton

Thursday’s callback will likely be different for the stock, however, according to BMO Capital Markets equity analyst Simeon Siegel. While shares fell on early news, actual spending for the company is expected to be materially different.

In the case of the treadmill, Peloton fully reimbursed customers. With Thursday’s bike recall, the company will only be shipping new bike seats, which Siegel says is “apples and oranges for memories of the last recall.”

“(The recall is) clearly negative, but we think this headline may seem scarier than the actual announcement,” Siegel wrote in a note Thursday.

Siegel also notes that Peloton is working with CPSC to resolve the issue, which was not the case initially when the treadmill was recalled.

Josh is a reporter for Yahoo Finance.

Click here for the latest stock market news and in-depth analysis, including events moving stocks

Read the latest financial and business news from Yahoo Finance


Leave a Reply

Your email address will not be published. Required fields are marked *