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Peloton shares fall after U.S. regulators signal Tread+ warning

U.S. regulators warns consumers to stop using Peloton’s Tread+ after a toddler was pulled under the treadmill in a terrifying video.

Video transcript

JULIE HYMAN: We're watching a couple of movers this morning for unfortunate reasons, both of them having to do with health hazards. The first of them is Peloton because there are some warnings now being issued about its Tread treadmill product, that it can be dangerous for children. We previously knew that it had resulted in the death of a child. And now Peloton is coming out and sort of responding to this. Brian Sozzi, you wrote about this. And it just seems-- obviously, it's unfortunate all around. And I don't know what it means for the future of this product.

BRIAN SOZZI: Yeah so Julie, really, this started to take on a life of its own over the weekend. On Saturday, the US Consumer Product Safety Commission, or the CPSC, tweeted a video-- really, a disturbing video of a young child getting pulled underneath a Peloton treadmill. The young child, he was holding a pink ball. And he put the ball under the treadmill, and he got pulled under. He appeared to be OK. He pulled himself out from under the treadmill, and then he left. And then that was the video was done. But the CPSC has said consumers should stop using these treadmills. So they effectively put a warning out on the safety of this treadmill.

Now, Peloton is out. They had a response immediately after that, calling what the CPSC said-- it's a confusing situation. As you can see, they said it was inaccurate. And then you had Peloton CEO and founder John Foley come out yesterday with a statement saying they didn't want to share some information with the agency due to privacy concerns.

The bottom line here is that you're seeing Peloton shares down about 5% in the pre-market, the stocks in the market right now. The stock has been under pressure since Peloton disclosed in mid-March a child had died as a result of some undisclosed incident with the treadmill. But I think this puts pressure on Peloton to figure this out, obviously. And clearly, they haven't.

And then secondarily, start to close, in disclosing to investors what component of the business is, in fact, treadmills. This treadmill was launched-- they launched treadmills about three years ago. It's still unclear to investors how much in treadmill sales they do. They do not disclose this. But again, this is not what you want to see because it can have a halo effect over the brand and impact potentially new hardware sales of treadmills, maybe bikes, but also, current people using these products. Perhaps they become less engaged with the platform. And that will come with a bottom line impact as well. But again, a very unfortunate situation here.

MYLES UDLAND: Yeah, and, you know, I just don't like to see executive teams getting into a war of words with US regulators over disagreements on how regulators' inquiry into a certain incident with a piece of their equipment went down. I just don't think that that's really productive for the company. Again, the stock down 5%. I mean, the stock price, really, in the public consciousness doesn't really matter when it comes to Peloton. The reason people love Peloton is because they buy it, they use a lot. They get excited about it.

Continuing to keep this story going in this kind of fashion is going to have Peloton making news outside of the financial media. Again, management team, stock is down 5%, no big deal. But to be doing this back and forth and to maybe be drawing more attention to this ongoing story is just-- I don't know. It's just-- it's not my favorite way to be handling this. Just fix the problem, right? Just stop having-- stop having this kind of exchange out in public. But [INAUDIBLE]. We'll see where it goes.