Class Action Centers on Peloton Stock Price Dip Following Tread+ Safety Concerns

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A proposed class action alleges Peloton Interactive and its CEO and CFO issued within the last seven months “materially false and/or misleading statements” with regard to safety concerns surrounding the company’s Tread+ treadmill. 

The 21-page securities lawsuit alleges the defendants, between September 11, 2020 and April 16, 2021 (the class period), made false and/or misleading statements and/or failed to disclose to Peloton securities holders that the Tread+ had caused “a serious safety threat” to children and pets “in addition to the tragic death of a child.” The case also claims the defendants were not forthcoming to investors with regard to the fact that safety, per the suit, “was not a priority to Peloton” as the company was “aware of serious injuries and death resulting from the Tread+ yet did not recall or suggest a halt” on use of the machine. 

Further still, the complaint alleges Peloton Interactive falsely and/or misleadingly misrepresented and/or failed to disclose during the same time period that the U.S. Consumer Product Safety Commission (CPSC), as a result of the Tread+ safety concerns, declared that the product posed a safety risk serious enough to “urgent[ly]” recommend that consumers with small children stop using the machine. The CPSC, in the same light, also found a “safety threat” to Tread+ users should they lose their balance, the case says. 

As a result of the foregoing, the defendants’ statements about Peloton’s business, operations and prospects during the class period were, according to the lawsuit, “materially false and misleading and/or lacked a reasonable basis,” and injured Peloton stockholders financially. 

An event spotlighted in the complaint is Business Insider’s publication of an October 15, 2020 article centered on Peloton’s recall of nearly 30,000 stationary bikes in the wake of reports of pedal breakages and customer injuries. Within the article was a quote from a Peloton spokesperson, who stated, in relevant part, that for the company there was “no greater priority than the safety and well-being of Peloton Members,” the lawsuit states. A day later, the New York Times also reported on the Peloton recall with an article that included a statement from the same company spokesperson, who said, in relevant part, that the defendant “was focused on the safety and well-being of customers.” 

On March 18, 2021, Peloton CEO John Foley revealed in a letter to Tread+ owners a “tragic situation” involving the death of a child that was linked to the Tread+, the lawsuit continues. In the letter, Foley stated, in pertinent part, that Peloton “design[s] and build[s] all of our products with safety in mind.” The letter also touched upon what Peloton equipment owners could do to prevent accidents and protect children and small pets, and reinforced that the company is “currently assessing ways to reinforce our warnings about these critical safety precautions to hopefully prevent future accidents,” the complaint says. 

According to the lawsuit, the “truth” began to emerge when the CPSC issued a press release warning consumers to stop using the Tread+ treadmill. In the press release, the CPSC stated that it had found that “the public health and safety requires this notice to warn the public quickly of the hazard,” the suit says. What came next, the lawsuit says, was a letter from Foley in which he stressed Peloton had no intention to stop selling or recall the Tread+. 

Upon this news, Peloton’s stock price fell more than 14 percent, the case says.

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