John Foley’s Fall From Peloton And The Stock Market Founder’s Big Trouble

0
88


John Foley, co-founder and CEO of Peloton Interactive Inc., poses for a photo during the company’s initial public offering (IPO) in front of the Nasdaq MarketSite in New York, U.S., on Thursday, September 26, 2019.

Michael Nagle | Mayor Bloomberg | fake images

About two months later platoon IPO founder John Foley appeared on CNBC’s “Closing Bell,” where he touted the connected fitness company’s “revenue predictability.”

“We know how to grow and hit the landings in what we say to the street, what we say to our board of directors and our investors [about] how we’re going to grow,” Foley said in that Nov. 5, 2019, interview.

That is a very different tone from what Foley said on the company’s fiscal 2022 second quarter conference call on Feb. 8, where he acknowledged that the company had “made missteps along the way,” was “holding itself accountable,” and was going to “To own that, which included his departure as CEO, various board and executive changes, and a wide range of cost-saving measures, including cutting about 20% of its corporate workforce.

Platoon, twice CNBC Company Disruptor 50, has been led by Foley since its founding in 2012, with fellow founders Tom Cortese, Yony Feng and Hisao Kushi remaining as senior executives. The other co-founder, Graham Stanton, left in March 2020 but stayed on as an advisor, according to his LinkedIn.

Peloton’s bumpy road, which has seen its share price drop more than 73% over the past year, has raised the question of how long a CEO-founder like Foley should hang on after the IPO, especially if that ride starts to look more like HIIT and riding hills than an easy one.

The history is very varied. On one hand, you have a founder like Jeff Bezos who stayed on as CEO for over 20 years afterward. AmazonIPO’s with massive growth on the way. Of course, there’s Steve Jobs, who ended up leaving Apple amid board tensions after hiring “professional CEO” John Sculley, only to eventually return to oversee one of the most remarkable business turnarounds in market history. On the other hand, you have groupon founder Andrew Mason, who was fired as chief executive in 2013, about 18 months after the company went public, following a series of Wall Street failures, a stock price plunge and very public mishaps.

Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management, said that 20 or 30 years ago, the tendency for many venture capitalists would be to remove founding management in a critical change in a company’s life stage. , “then entered, in quotes, the ‘professional management,'” he said.

That’s happening less now, and Sonnenfeld said part of that is for good reasons, like having a more experienced leadership group that has experience leading companies through various life cycles. Foley did, with Barnes & Noble and other startups. But there are bad reasons, such as “actions by founders that ensure their status as leader for life in the empire,” he said. In the case of Peloton, where Foley will remain chairman, he and other company members still control about 60% of the company’s voting shares.

Peloton responded to a request for comment before press time.

When is the time for a founder to step aside?

More founders, especially in technology, are replacing themselves. Manish Sood, who founded the cloud data management company Reltio, wrote in a 2020 CNBC op-ed that the reason he replaced himself as CEO after nearly a decade in the role is that he “recognized that sustaining predictable hyper-growth requires a special set of skills, and Reltio would require a CEO with experience in management of public companies”.

“Preparing for growth requires courage at every stage,” Sood wrote. “In the beginning, entrepreneurs often risk everything to start businesses because they believe in a new or different vision. They often face seemingly insurmountable obstacles. It takes a lot of insight to recognize when an emerging growth company needs to pivot or change direction as it grows. “

Jack Dorsey shared a similar sentiment when he suddenly resigned as Twitter CEO in November.

“There is a lot of talk about the importance of a company being ‘founder-led.’ Ultimately, I think it’s a severe limitation and a single point of failure… I think it’s critical that a company be able to stand on its own, free from the influence or direction of its founder,” Dorsey said. wrote in a note to Twitter employees.

There have been some efforts to try to find out exactly what the founder-CEO lifespan is. a recent Harvard Business Review study of financial performance of more than 2,000 publicly traded companies found that, on average, companies led by founders outperform those with CEOs who are not founders.

However, that difference essentially drops to zero three years after the company’s IPO, at which point the founding CEOs “actually start to detract from the company.”

“Our data shows that the presence of a founder-CEO increases company value before and during the IPO, suggesting that a founder-friendly approach actually makes a lot of sense for venture capitalists, who typically invest while companies are out there.” companies are still in their early stages and withdraw money shortly after their IPO,” the authors wrote. “However, given our finding that, on average, post-IPO performance is lower for companies with founding CEOs, investors looking to enter after a company has already gone public would be wise to adopt a less founder-friendly approach, and investors, board members, and executive teams will benefit by proactively encouraging founder-CEOs to move on before their due dates hit.”

It’s unclear what the future holds for Peloton and if it can recapture the momentum that saw it disrupt the fitness industry.

The company’s new CEO, Barry McCarthy, cited his experience working with two “visionary founders” in Reed Hastings and Daniel Ek in Netflix Y Spotifyrespectively, in your first email to Peloton staffwhich was obtained by CNBC, saying that he is “now teaming up with John [Foley] to create the same kind of magic.”

“Finding product-to-market fit is incredibly difficult to do. It’s extremely rare. And I think we have it,” McCarthy wrote. “The challenge for us now is to figure out the rest of the business model so that we can win in the market and on Wall Street.”

REGISTER for our original weekly newsletter that goes beyond the list and offers a closer look at CNBC’s Disruptor 50 companies and the founders who continue to innovate across all sectors of the economy.

.



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here