Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 1 of 21 PageID #: 1
`
`
`
`THE ROSEN LAW FIRM, P.A.
`Phillip Kim, Esq. (PK 9384)
`Laurence M. Rosen, Esq. (LR 5733)
`275 Madison Ave., 40th Floor
`New York, New York 10016
`Telephone: (212) 686-1060
`Fax: (212) 202-3827
`Email: pkim@rosenlegal.com
`lrosen@rosenlegal.com
`
`
`Counsel for Plaintiff
`
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`
`ASHLEY WILSON, Individually and on behalf
`of all others similarly situated,
`
`
`Plaintiff,
`
`v.
`
`PELOTON INTERACTIVE, INC., JOHN
`FOLEY, AND JILL WOODWORTH,
`
`
`
`Defendants.
`
`
`
`
`Case No.
`
`CLASS ACTION COMPLAINT FOR
`VIOLATION OF THE FEDERAL
`SECURITIES LAWS
`
`JURY TRIAL DEMANDED
`
`CLASS ACTION
`
`Plaintiff Ashley Wilson (“Plaintiff”), individually and on behalf of all other persons
`
`similarly situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against
`
`Defendants (defined below), alleges the following based upon personal knowledge as to Plaintiff
`
`and Plaintiff’s own acts, and information and belief as to all other matters, based upon, inter alia,
`
`the investigation conducted by and through Plaintiff’s attorneys, which included, among other
`
`things, a review of the defendants’ public documents, and announcements made by defendants,
`
`United States Securities and Exchange Commission (“SEC”) filings, wire and press releases
`
`published by and regarding Peloton Interactive, Inc. (“Peloton” or the “Company”), analysts’
`
`reports and advisories about the Company, and information readily obtainable on the Internet.
`
`1
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 2 of 21 PageID #: 2
`
`
`
`Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein
`
`after a reasonable opportunity for discovery.
`
`NATURE OF THE ACTION
`
`1.
`
`This is a federal securities class action on behalf of all persons and entities who
`
`purchased or otherwise acquired the publicly traded securities of Peloton between September 11,
`
`2020 and April 16, 2021, inclusive (the “Class Period”). Plaintiff seeks to recover compensable
`
`damages caused by Defendants’ violations of the federal securities laws under the Securities
`
`Exchange Act of 1934 (the “Exchange Act”).
`
`JURISDICTION AND VENUE
`
`2.
`
`The claims asserted herein arise under and pursuant to §§10(b) and 20(a) of the
`
`Exchange Act (15 U.S.C. §78j(b) and §78t(a)) and Rule 10b-5 promulgated thereunder by the
`
`SEC (17 C.F.R. §240.10b-5).
`
`3.
`
`This Court has jurisdiction over the subject matter of this action under 28 U.S.C.
`
`§1331 and §27 of the Exchange Act.
`
`4.
`
`Venue is proper in this judicial district pursuant to §27 of the Exchange Act (15
`
`U.S.C. §78aa) and 28 U.S.C. §1391(b) as the alleged misstatements entered and subsequent
`
`damages took place within this judicial district.
`
`5.
`
`In connection with the acts, conduct and other wrongs alleged in this Complaint,
`
`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
`
`including but not limited to, the United States mail, interstate telephone communications and the
`
`facilities of the national securities exchange.
`
`
`
`
`
`2
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 3 of 21 PageID #: 3
`
`
`
`PARTIES
`
`6.
`
`Plaintiff, as set forth in the accompanying certification incorporated by reference
`
`herein, purchased Peloton securities during the Class Period and was economically damaged
`
`thereby.
`
`7.
`
`Defendant Peloton provides interactive fitness products such as the Peloton Bike
`
`and the Peloton Tread+ and Tread, which include touchscreens that stream live and on-demand
`
`classes. Peloton also provides connected fitness subscriptions and access to all live and on-
`
`demand classes. Peloton is a Delaware corporation with its headquarters located at 125 West 25th
`
`Street, 11th Floor, New York, NY 10001. Peloton’s securities are traded on NASDAQ under the
`
`ticker “PTON.”
`
`8.
`
`Defendant John Foley (“Foley”) has been the Chief Executive Officer (“CEO”) of
`
`Peloton throughout the Class Period.
`
`9.
`
`Defendant Jill Woodworth (“Woodworth”) has been the Chief Financial Officer of
`
`Peloton (“CFO”) throughout the Class Period.
`
`10. Defendants Foley and Woodworth are sometimes referred to herein as the
`
`“Individual Defendants.”
`
`11. Each of the Individual Defendants:
`
`(a)
`
`directly participated in the management of the Company;
`
`(b)
`
`was directly involved in the day-to-day operations of the Company at the highest
`
`levels;
`
`(c)
`
`was privy to confidential proprietary information concerning the Company and its
`
`business and operations;
`
`3
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 4 of 21 PageID #: 4
`
`
`
`(d)
`
`was directly or indirectly involved in drafting, producing, reviewing and/or
`
`disseminating the false and misleading statements and information alleged herein;
`
`(e)
`
`was directly or indirectly involved in the oversight or implementation of the
`
`Company’s internal controls;
`
`(f)
`
`was aware of or recklessly disregarded the fact that the false and misleading
`
`statements were being issued concerning the Company; and/or
`
`(g)
`
`approved or ratified these statements in violation of the federal securities laws.
`
`12. The Company is liable for the acts of the Individual Defendants and its employees
`
`under the doctrine of respondeat superior and common law principles of agency because all of
`
`the wrongful acts complained of herein were carried out within the scope of their employment.
`
`13. The scienter of the Individual Defendants and other employees and agents of the
`
`Company is similarly imputed to the Company under respondeat superior and agency principles.
`
`14. The Company and the Individual Defendants are referred to herein, collectively, as
`
`the “Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`Background
`
`15. Peloton launched the Tread+ treadmill in 2018. At that time, it was called the
`
`“Tread.” The Company renamed its signature treadmill in September 2020 to “Tread +.”
`
` Materially False and Misleading Statements
`
`16. On September 11, 2020, Peloton filed its annual report on Form 10-K with the SEC
`
`for the year ended June 30, 2020 (“2020 10-K”). The 2020 10-K was signed by Defendants Foley
`
`and Woodworth. Attached to the 2020 10-K were certifications pursuant to the Sarbanes-Oxley
`
`Act of 2002 (“SOX”) signed by Defendants Foley and Woodworth attesting to the accuracy of
`
`financial reporting, the disclosure of any material changes to the Company’s internal control over
`
`4
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 5 of 21 PageID #: 5
`
`
`
`financial reporting and the disclosure of all fraud. The 2020 10-K discussed the design of
`
`Peloton’s products, stating in relevant part:
`
`Our products and services may be affected from time to time by design and
`manufacturing defects that could adversely affect our business and result in
`harm to our reputation.
`
`We offer complex hardware and software products and services that can be affected
`by design and manufacturing defects. Sophisticated operating system software and
`applications, such as those offered by us, often have issues that can unexpectedly
`interfere with the intended operation of hardware or software products. Defects may
`also exist in components and products that we source from third parties. Any such
`defects could make our products and services unsafe, create a risk of environmental
`or property damage and personal injury, and subject us to the hazards and
`uncertainties of product liability claims and related litigation. In addition, from time
`to time we may experience outages, service slowdowns, or errors that affect our
`fitness and wellness programming. As a result, our services may not perform as
`anticipated and may not meet customer expectations. There can be no assurance
`that we will be able to detect and fix all issues and defects in the hardware, software,
`and services we offer. Failure to do so could result in widespread technical and
`performance issues affecting our products and services and could lead to claims
`against us. We maintain general liability insurance; however, design and
`manufacturing defects, and claims related thereto, may subject us to judgments or
`settlements that result in damages materially in excess of the limits of our insurance
`coverage. In addition, we may be exposed to recalls, product replacements or
`modifications, write-offs of inventory, property and equipment, or intangible
`assets, and significant warranty and other expenses such as litigation costs and
`regulatory fines. If we cannot successfully defend any large claim, maintain our
`general liability insurance on acceptable terms, or maintain adequate coverage
`against potential claims, our financial results could be adversely impacted. Further,
`quality problems could adversely affect the experience for users of our products
`and services, and result in harm to our reputation, loss of competitive advantage,
`poor market acceptance, reduced demand for our products and services, delay in
`new product and service introductions, and lost revenue.
`
`17. The 2020 10-K discussed regulatory disputes and other proceedings, stating in
`
`relevant part:
`
`From time to time, we may be subject to legal proceedings, regulatory disputes,
`and governmental inquiries that could cause us to incur significant expenses,
`divert our management’s attention, and materially harm our business, financial
`condition, and operating results.
`
`From time to time, we may be subject to claims, lawsuits, government
`investigations, and other proceedings involving products liability, competition and
`
`5
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 6 of 21 PageID #: 6
`
`antitrust, intellectual property, privacy, consumer protection, securities, tax, labor
`and employment, commercial disputes, and other matters that could adversely
`affect our business operations and financial condition. As we have grown, we have
`seen a rise in the number and significance of these disputes and inquiries. Litigation
`and regulatory proceedings, and particularly the intellectual property infringement
`matters that we are currently facing or could face, may be protracted and expensive,
`and the results are difficult to predict. Certain of these matters include speculative
`claims for substantial or indeterminate amounts of damages and include claims for
`injunctive relief. Additionally, our litigation costs could be significant. Adverse
`outcomes with respect to litigation or any of these legal proceedings may result in
`significant settlement costs or judgments, penalties and fines, or require us to
`modify our products or services, make content unavailable, or require us to stop
`offering certain features, all of which could negatively affect our membership and
`revenue growth. See Note 13 of the notes to our consolidated financial statements
`and the section titled “—Legal Proceedings” in Part I, Item 3 of this Annual Report
`on Form 10-K.
`
`The results of litigation, investigations, claims, and regulatory proceedings cannot
`be predicted with certainty, and determining reserves for pending litigation and
`other legal and regulatory matters requires significant judgment. There can be no
`assurance that our expectations will prove correct, and even if these matters are
`resolved in our favor or without significant cash settlements, these matters, and the
`time and resources necessary to litigate or resolve them, could harm our business,
`financial condition, and operating results.
`
`
`
`
`
`18. On October 15, 2020, Business Insider published the article “Peloton issued a recall
`
`affecting nearly 30,000 bikes after reports of pedal breakages and customer injuries” which
`
`reported that Peloton recalled clip-in pedals for certain of the Company’s bikes after Peloton
`
`received 120 reports of breakage and 16 reports of injury. The article quoted a Peloton
`
`spokesperson discussing the safety of Peloton’s products, stating in relevant part:
`
`The company announced Thursday that the recall applies to PR70P pedals, fitted
`on bikes sold between July 2013 and May 2016. The recall affects 27,000 bikes.
`
`Peloton said it received 120 reports of pedal breakage and 16 reports of injury. Of
`the injuries, five required medical care, "such as stitches to the lower leg," the
`company said in a blog post.
`
`"There is no greater priority than the safety and well-being of Peloton Members,"
`Peloton spokeswoman Amelise Lane said in an email to Business Insider. The
`
`6
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 7 of 21 PageID #: 7
`
`
`
`company has asked customers to stop using bikes with these pedals and get a
`replacement from the company.
`
`Peloton customers previously said they have waited months to get replacement
`pedals after the accessories break off mid-ride, Business Insider's Madeline Stone
`reported. The company has limited some in-home service due to the COVID-19
`pandemic, and customers also reported struggling to fix their own bikes.
`
`
`
`(Emphasis added).
`
`19. On October 16, 2020, The New York Times published the article “Peloton Recalls
`
`Pedals on Thousands of Bikes After Reports of Injury” which included a statement from the
`
`Company regarding the safety of its products, stating in part:
`
`Amelise Lane, a spokeswoman for Peloton, said the company was focused on the
`safety and well-being of customers. “We take pride in providing the best
`equipment, proprietary networked software, and world-class streaming digital
`fitness and wellness content that our members love,” she said in a statement. She
`added that the recall affected only customers using their out-of-warranty original
`pedals on the affected bikes sold. The recall was earlier reported by Business
`Insider.
`
`(Emphasis added).
`
`20. On November 6, 2020, Peloton filed a Form 10-Q for the quarter ended September
`
`30, 2020 (“1Q 2021 10-Q”). The 1Q 2021 10-Q was signed by Defendants Foley and Woodworth.
`
`Attached to the 1Q 2021 10-Q were SOX certifications signed by Defendants Foley and
`
`Woodworth attesting to the accuracy of financial reporting, the disclosure of any material changes
`
`to the Company’s internal control over financial reporting and the disclosure of all fraud. The 1Q
`
`2021 10-Q discussed the design of Peloton’s products, stating in relevant part:
`
`Our products and services may be affected from time to time by design and
`manufacturing defects that could adversely affect our business and result in
`harm to our reputation.
`
`We offer complex hardware and software products and services that can be affected
`by design and manufacturing defects. Sophisticated operating system software and
`applications, such as those offered by us, often have issues that can unexpectedly
`interfere with the intended operation of hardware or software products. Defects may
`also exist in components and products that we source from third parties. Any such
`
`7
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 8 of 21 PageID #: 8
`
`
`
`defects could make our products and services unsafe, create a risk of environmental
`or property damage and personal injury, and subject us to the hazards and
`uncertainties of product liability claims and related litigation. In addition, from time
`to time we may experience outages, service slowdowns, or errors that affect our
`fitness and wellness programming. As a result, our services may not perform as
`anticipated and may not meet customer expectations. There can be no assurance
`that we will be able to detect and fix all issues and defects in the hardware, software,
`and services we offer. Failure to do so could result in widespread technical and
`performance issues affecting our products and services and could lead to claims
`against us. We maintain general liability insurance; however, design and
`manufacturing defects, and claims related thereto, may subject us to judgments or
`settlements that result in damages materially in excess of the limits of our insurance
`coverage. In addition, we may be exposed to recalls, product replacements or
`modifications, write-offs of inventory, property and equipment, or intangible
`assets, and significant warranty and other expenses such as litigation costs and
`regulatory fines. If we cannot successfully defend any large claim, maintain our
`general liability insurance on acceptable terms, or maintain adequate coverage
`against potential claims, our financial results could be adversely impacted. Further,
`quality problems could adversely affect the experience for users of our products
`and services, and result in harm to our reputation, loss of competitive advantage,
`poor market acceptance, reduced demand for our products and services, delay in
`new product and service introductions, and lost revenue.
`
`
`21. The 1Q 2021 10-Q discussed regulatory disputes and other proceedings, stating in
`
`relevant part:
`
`From time to time, we may be subject to legal proceedings, regulatory disputes,
`and governmental inquiries that could cause us to incur significant expenses,
`divert our management’s attention, and materially harm our business, financial
`condition, and operating results.
`
`From time to time, we may be subject to claims, lawsuits, government
`investigations, and other proceedings involving products liability, competition and
`antitrust, intellectual property, privacy, consumer protection, securities, tax, labor
`and employment, commercial disputes, and other matters that could adversely
`affect our business operations and financial condition. As we have grown, we have
`seen a rise in the number and significance of these disputes and inquiries. Litigation
`and regulatory proceedings, and particularly the intellectual property infringement
`matters that we are currently facing or could face, may be protracted and expensive,
`and the results are difficult to predict. Certain of these matters include speculative
`claims for substantial or indeterminate amounts of damages and include claims for
`injunctive relief. Additionally, our litigation costs could be significant. Adverse
`outcomes with respect to litigation or any of these legal proceedings may result in
`significant settlement costs or judgments, penalties and fines, or require us to
`modify our products or services, make content unavailable, or require us to stop
`
`8
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 9 of 21 PageID #: 9
`
`
`
`offering certain features, all of which could negatively affect our membership and
`revenue growth. See Note 8 of the notes to our condensed consolidated financial
`statements and the section titled “—Legal Proceedings” in Part II, Item 1 of this
`Quarterly Report on Form 10-Q.
`
`22. On February 5, 2021, Peloton filed a Form 10-Q for the quarter ended December
`
`31, 2020 (“2Q 2021 10-Q”). The 2Q 2021 10-Q was signed by Defendants Foley and Woodworth.
`
`Attached to the 2Q 2021 10-Q were SOX certifications signed by Defendants Foley and
`
`Woodworth attesting to the accuracy of financial reporting, the disclosure of any material changes
`
`to the Company’s internal control over financial reporting and the disclosure of all fraud. The 2Q
`
`2021 10-Q discussed the design of Peloton’s products, stating in relevant part:
`
`Our products and services may be affected from time to time by design and
`manufacturing defects that could adversely affect our business and result in
`harm to our reputation.
`
`We offer complex hardware and software products and services that can be affected
`by design and manufacturing defects. Sophisticated operating system software and
`applications, such as those offered by us, often have issues that can unexpectedly
`interfere with the intended operation of hardware or software products. Defects may
`also exist in components and products that we source from third parties. Any such
`defects could make our products and services unsafe, create a risk of environmental
`or property damage and personal injury, and subject us to the hazards and
`uncertainties of product liability claims and related litigation. In addition, from time
`to time we may experience outages, service slowdowns, or errors that affect our
`fitness and wellness programming. As a result, our services may not perform as
`anticipated and may not meet customer expectations. There can be no assurance
`that we will be able to detect and fix all issues and defects in the hardware, software,
`and services we offer. Failure to do so could result in widespread technical and
`performance issues affecting our products and services and could lead to claims
`against us. We maintain general liability insurance; however, design and
`manufacturing defects, and claims related thereto, may subject us to judgments or
`settlements that result in damages materially in excess of the limits of our insurance
`coverage. In addition, we may be exposed to recalls, product replacements or
`modifications, write-offs of inventory, property and equipment, or intangible
`assets, and significant warranty and other expenses such as litigation costs and
`regulatory fines. If we cannot successfully defend any large claim, maintain our
`general liability insurance on acceptable terms, or maintain adequate coverage
`against potential claims, our financial results could be adversely impacted. Further,
`quality problems could adversely affect the experience for users of our products
`and services, and result in harm to our reputation, loss of competitive advantage,
`
`9
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 10 of 21 PageID #: 10
`
`
`
`poor market acceptance, reduced demand for our products and services, delay in
`new product and service introductions, and lost revenue.
`
`The results of litigation, investigations, claims, and regulatory proceedings cannot
`be predicted with certainty, and determining reserves for pending litigation and
`other legal and regulatory matters requires significant judgment. There can be no
`assurance that our expectations will prove correct, and even if these matters are
`resolved in our favor or without significant cash settlements, these matters, and the
`time and resources necessary to litigate or resolve them, could harm our business,
`financial condition, and operating results.
`
`23. The 2Q 2021 10-Q discussed regulatory disputes and other proceedings, stating in
`
`relevant part:
`
`From time to time, we may be subject to legal proceedings, regulatory disputes,
`and governmental inquiries that could cause us to incur significant expenses,
`divert our management’s attention, and materially harm our business, financial
`condition, and operating results.
`
`From time to time, we may be subject to claims, lawsuits, government
`investigations, and other proceedings involving products liability, competition and
`antitrust, intellectual property, privacy, consumer protection, securities, tax, labor
`and employment, commercial disputes, and other matters that could adversely
`affect our business operations and financial condition. As we have grown, we have
`seen a rise in the number and significance of these disputes and inquiries.
`Litigation and regulatory proceedings, and particularly the intellectual property
`infringement matters that we are currently facing or could face, may be protracted
`and expensive, and the results are difficult to predict. Certain of these matters
`include speculative claims for substantial or indeterminate amounts of damages
`and include claims for injunctive relief. Additionally, our litigation costs could be
`significant. Adverse outcomes with respect to litigation or any of these legal
`proceedings may result in significant settlement costs or judgments, penalties and
`fines, or require us to modify our products or services, make content unavailable,
`or require us to stop offering certain features, all of which could negatively affect
`our membership and revenue growth. See Note 9 of the notes to our condensed
`consolidated financial statements and the section titled “—Legal Proceedings” in
`Part II, Item 1 of this Quarterly Report on Form 10-Q.
`
`The results of litigation, investigations, claims, and regulatory proceedings cannot
`be predicted with certainty, and determining reserves for pending litigation and
`other legal and regulatory matters requires significant judgment. There can be no
`assurance that our expectations will prove correct, and even if these matters are
`resolved in our favor or without significant cash settlements, these matters, and
`the time and resources necessary to litigate or resolve them, could harm our
`business, financial condition, and operating results.
`
`
`
`10
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 11 of 21 PageID #: 11
`
`
`
`24. On March 18, 2021, Defendant Foley wrote a letter that was emailed to Tread+
`
`owners and also published on Peloton’s website revealing a tragic situation involving the death
`
`of a child from a Tread+. Defendant Foley’s letter stated in part:
`
`We design and build all of our products with safety in mind. But in order to help
`ensure that you and your family members stay safe with Peloton products in your
`home, we need your help. This is especially true during what I hope is the final
`stretch of the pandemic where everyone is still at home. To prevent accidents,
`please take care to review and follow all the safety warnings and instructions that
`we provide, and always:
`
`• Keep children and pets away from Peloton exercise equipment at all times.
`Before you begin a workout, double check to make sure that the space
`around your Peloton exercise equipment is clear.
`• When you finish a workout on your Tread+, remove the safety key and store
`it out of reach of children and anyone else who should not be able to start
`the Tread+.
`
`We are always looking for new ways to ensure that you have the best experience
`with our products, and we are currently assessing ways to reinforce our warnings
`about these critical safety precautions to hopefully prevent future accidents.
`
`(Emphasis added).
`
`25. The statements referenced in ¶¶16-24 above were materially false and/or
`
`misleading because they misrepresented and failed to disclose the following adverse facts
`
`pertaining to the Company’s business, operational and financial results, which were known to
`
`Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or
`
`misleading statements and/or failed to disclose that: (1) in addition to the tragic death of a child,
`
`Peloton’s Tread+ had caused a serious safety threat to children and pets as there were multiple
`
`incidents of injury to both; (2) 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+; (3) as a result of the safety concerns, the U.S. Consumer Product Safety
`
`Commission (“CPSC”) declared the Tread+ posed a serious risk to public health and safety
`
`11
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 12 of 21 PageID #: 12
`
`
`
`resulting in its urgent recommendation for consumers with small children to cease using the
`
`Tread+; (4) the CPSC also found a safety threat to Tread+ users if they lost their balance; and (5)
`
`as a result of the foregoing, Defendants’ statements about Peloton’s business, operations, and
`
`prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant
`
`times.
`
`The Truth Emerges
`
`26. On April 17, 2021, a day the market was closed, the CPSC issued a press release
`
`entitled “CPSC Warns Consumers: Stop Using the Peloton Tread+” alerting the public to dangers,
`
`including death, associated with the Peloton Tread+, stating in relevant part:
`
`Urgent Warning Comes After Agency Finds One Death and Dozens of Incidents of
`
`Children Being Sucked Beneath the Tread+ (Formerly Known as the Tread)
`
`WASHINGTON, D.C. – The U.S. Consumer Product Safety Commission (CPSC)
`
`is warning consumers about the danger of popular Peloton Tread+ exercise machine
`
`after multiple incidents of small children and a pet being injured beneath the
`
`machines. The Commission has found that the public health and safety requires
`
`this notice to warn the public quickly of the hazard.
`
`The urgent warning comes less than a month after Peloton itself released news of a
`
`child’s death by a Peloton Tread+ and CPSC’s announcement of an investigation
`
`into that incident.
`
`The agency is continuing to investigate all known incidents of injury or death
`
`related to the Peloton Tread+.
`
`To date, CPSC is aware of 39 incidents including one death. CPSC staff believes
`
`the Peloton Tread+ poses serious risks to children for abrasions, fractures, and
`
`death. In light of multiple reports of children becoming entrapped, pinned, and
`
`pulled under the rear roller of the product, CPSC urges consumers with children
`
`at home to stop using the product immediately. This video demonstrates the
`
`hazard to children posed by the Tread+. [Warning, video content may be disturbing
`
`to some viewers.] It is believed that at least one incident occurred while a parent
`
`was running on the treadmill, suggesting that the hazard cannot be avoided
`
`simply by locking the device when not in use. Reports of a pet and objects being
`
`12
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 13 of 21 PageID #: 13
`
`
`
`sucked beneath the Tread+ also suggest possible harm to the user if the user loses
`
`balance as a result.
`
`What should consumers do now?
`
`•
`
`• Stop using the Peloton Tread+ if there are small children or pets at home.
`Incidents suggest that children may be seriously injured while the Tread+
`is being used by an adult, not just when a child has unsupervised access
`to the machine.
`If consumers must continue to use the product, CPSC urges consumers to
`use the product only in a locked room, to prevent access to children and pets
`while the treadmill is in use. Keep all objects, including exercise balls and
`other equipment, away from the treadmill.
`• When not in use, unplug the Tread+ and store the safety key away from
`the device and out of reach of children.
`to
`incidents
`• Report
`any
`Peloton
`Tread+
`at www.SaferProducts.gov or to CPSC’s Hotline at 800-638-2772.
`
`CPSC
`
`Tread+ treadmills are sold directly to consumers via retail showrooms, and online
`
`at www.onepeloton.com.
`
`Model No. TR-01 was called “Tread” from August 2018 to September 2020, when
`
`it was renamed “Tread+”.
`
`
`(Emphasis added.)
`
`
`27. On April 18, 2021, a day the market was closed, Defendant Foley wrote a letter
`
`emailed to Tread+ owners and published on the Company’s website stating that Peloton had “no
`
`intention” to stop selling or to recall the Tread+.
`
`28. On this news, Peloton’s stock price fell $16.28 per share, or more than 14%, over
`
`the next three trading days to close at $99.93 per share on April 21, 2021, damaging investors.
`
`29. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
`
`in the market value of the Company’s securities, Plaintiff and other Class members have suffered
`
`significant losses and damages.
`
`
`
`
`
`13
`
`

`

`Case 1:21-cv-02369 Document 1 Filed 04/29/21 Page 14 of 21 PageID #: 14
`
`
`
`PLAINTIFF’S CLASS ACTION ALLEGATIONS
`
`30. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
`
`Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons and entities, other than
`
`Defendants, who purchased or otherwise acquired the publicly traded securities of Peloton during
`
`the Class Period and were damaged thereby (the “Class”). Excluded from the Class are
`
`Defendants, the officers and directors of the Company, at all relevant times, members of their
`
`immediate families and their legal representatives, heirs, successors or assigns and any entity in
`
`which Defendants have or had a controlling interest.
`
`31. The members of the Class are so numerous that joinder of all members is
`
`impracticable. Throughout the Class Period, the Company’s securities were actively traded on the
`
`NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can
`
`be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or
`
`thousands of members in the proposed Class. Record owners and other members of the Class may
`
`be identified from records maintained by the Company or its transfer agent and may be notified
`
`of the pendency of this action by mail, using the form of notice similar to that cust