Peloton Stock Falls Off Treadmill

Peloton shares have continued their decline following an “urgent warning” from the United States Government, commanding owners of the company’s Tread+ treadmill to stop using the machine. The Consumer Product Safety Commission said it has become aware of 39 accidents involving the treadmill, including “multiple reports of children becoming entrapped, pinned, and pulled under” the machine. A child died in March of 2021 in an incident involving the machine.

While Peloton initially claimed the federal agency’s notice was “inaccurate and misleading,” they decided to switch gears and cooperate with regulators and have now issued a recall of their treadmills. From a high of $171 per share to now $82, the stock is down more than 50% from 2020, which saw shares soar more than 400%.

Peloton’s ordeal with its treadmill shows how quickly the fortunes of a high-flying Wall-Street “darling” can change. With social media, a company’s products are always under intense scrutiny. All it takes is a single “viral” tweet or video – casting a company’s product in an unfavorable light, rightly or wrongly – to cause significant and sudden damage to a stock.

If they participated in a Stock Protection Trust, the Peloton investor could have protected their gains without selling their shares. They could have avoided most, or all, of the damage sustained by this more than 50% decline in the value of their stock.

Their plight offers a lesson to other investors with highly-appreciated or concentrated stock positions: it is prudent to protect your gains when the Company’s outlook appears healthy, as it is possible shares can fall off the treadmill at any time.