Exercise machine company Peloton Interactive Inc. and two of its executives were hit Thursday with an investor’s proposed class action after the company decided not to recall or halt sales of one of its products, despite a federal regulator’s warning about children and pets being “sucked beneath” the devices.
In her lawsuit in federal court in Brooklyn, Peloton investor Ashley Wilson accused the company, its CEO John Foley and its Chief Financial Officer Jill Woodworth of hurting investors after the company determined it would continue to sell its Tread+ treadmills in spite of the U.S. Consumer Product Safety Commission’s caution to consumers that they shouldn’t use the machine if small children or pets are nearby.
According to Wilson, Foley’s April 18 statement to investors, which said that the company had “no intention” to recall or stop selling the Tread+, pushed down trading prices for the company’s shares by $16.28 per share, or more than 14%, over three trading days. By April 21, Wilson said, Peloton shares were trading at $99.93.
In particular, Wilson alleged that the company had failed to disclose “multiple incidents” of Tread+ related injuries of children and pets. She also contended that “safety was not a priority to Peloton, as defendants were aware of serious injuries and death resulting from the Tread+ yet did not recall or suggest a halt of the use of the Tread+.”
Wilson accused the company, Foley and Woodworth of violating fraud provisions of the Securities Exchange Act of 1934.
On April 21, a proposed class of Peloton customers also filed suit against the company in Federal court in California.