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(Bloomberg) — Peloton Interactive Inc. founder John Foley’s agreement to step down as chief executive officer and stay on as executive chairman doesn’t guarantee an activist investor can push through the sale of the once-hot exercise company. 

Peloton is organized so that Foley, his wife and other insiders control the company with about 60% of the voting shares. Blackwells Capital LLC, which has pushed for Foley’s departure and a sale of the company, owns less than 5%.

Even with his voting prowess, Foley did agree Tuesday to cede the CEO job to Barry McCarthy, former chief financial officer at Spotify Technology SA. Peloton was a highflier during the early part of the pandemic when lockdowns made home fitness a necessity for many. But the return of fitness junkies to regular gyms has dented Peloton’s reputation and the stock fell last month below its September 2019 initial public offering price of $29. In recent days, the company’s shares have rebounded to about $38 on reports of a possible sale. 

Read More: Peloton Activist Blackwells Battled Barrack, Zell Before Targeting Foley

So far, Foley hasn’t ruled out a transaction, and the New York-based company has said it’s open to exploring options that would create value for Peloton shareholders. Even after Tuesday’s gain, the stock has lost about three-quarters of its value over the past year.

Foley’s power comes from Peloton’s Class B shares, which each get 20 votes, compared with one vote for each Class A share issued to other investors. In addition to Foley and his wife, Peloton co-founder and Chief Product Officer Tom Cortese, President William Lynch, and Chief Legal and Culture Officer Hisao Kushi are among other insiders with significant voting power from Class B shares, according to the company’s proxy statement.

Read More:  Peloton’s Famous Instructors, Who Can Make Upwards of $500,000 a Year, Escape Layoffs

It’s difficult to determine Foley’s exact voting control because the company says that figures in the proxy include hypothetical voting power of unexercised options. If Foley fully exercised all options, his control would be about 40%, the proxy shows, and by that same measure, all insiders would control 83% of the votes.

Institutional investors have been critical of the dual-class structure because it creates obstacles for other shareholders when they want to push for change at companies. Meta Platforms Inc. is often cited as an example because it’s a challenge for outsiders to force CEO Mark Zuckerberg to address, for example, Facebook’s ties to misinformation and perceived hate speech. Google owner Alphabet Inc. has a similar structure, making it more difficult for average shareholders to force changes at platforms such as YouTube.

With potential suitors such as Amazon.com Inc. and Nike Inc. being mentioned, it’s possible that Foley and Blackwells will ultimately agree to sell Peloton, even if they disagree on other issues, said Tom Lin, a Temple University law professor who wrote the 2022 book “The Capitalist and the Activist: Corporate Social Activism and the New Business of Change.”

“It’s an uphill battle for the activist because of the dual-class shares, unless he agrees to it,” Lin said.

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(Bloomberg) — President Joe Biden said that Australian electric vehicle charging company Tritium DCFC Ltd. will build a U.S. manufacturing facility in Tennessee and that the plant would set off a “ripple effect” that benefits workers and the planet as a whole.

The facility in Lebanon, east of Nashville, is expected to produce as many as 30,000 electric-vehicle chargers annually and create 500 jobs, the White House said.

Biden said charging electric vehicles in the U.S. will become “quick and easy.” “That foundation will help build America — help American automakers set the pace for electric vehicles, which means even more good-paying jobs producing batteries, materials and parts,” Biden said.

Tritium Chief Executive Officer Jane Hunter, who joined Biden at the White House Tuesday, said her company decided to invest more heavily in its American operations after seeing demand surge following the passage of the Biden administration’s infrastructure package last year. That eventually accelerated both plans to open a North American plant as well as expectations for how many chargers could be produced annually.

 

The company listed on the Nasdaq exchange in January and plans to move some senior executive positions to the U.S. as part of its expanding focus.

“That was a really big step-change for the company, and we see that North American market getting even bigger again next year — potentially even taking over what’s traditionally been for us, in Europe, our major revenue source,” Hunter said in an interview.

Tritium evaluated a number of potential factory sites, including Texas, before ultimately deciding on Tennessee because of a combination of tax incentives, logistics advantages, and labor availability in that state, the company said. Many of the workers at the factory would only need a few weeks of training to begin building the chargers, Hunter added.

“It’s an announcement about manufacturing and what the Biden administration’s legislation has done to draw companies into the country, grow jobs onshore, grow manufacturing onshore, and I think it’s just a lovely example of that,” she said.

The White House has said its goal is to build a national network of at least half a million electric-vehicle charging stations by the end of the decade. The infrastructure law includes $65 billion for upgrades to the nation’s electrical grid, $7 billion earmarked to bolster the supply chain for electric vehicles, and $7.5 billion specifically earmarked for charging stations.

The first $5 billion tranche of charging-station funding is expected to be distributed over the next five days, with Transportation Secretary Pete Buttigieg and Energy Secretary Jennifer Granholm set to announce later this week how much each state will receive under the program. The federal government plans to designate corridors along the interstate highway system where drivers could be assured they would have access to charging stations.

If completed, the build-out would represent a significant increase in available chargers, which automobile companies hope will ease the anxiety expressed by consumers who are reluctant to give up on the convenience offered by gas-powered vehicles. The Department of Energy estimates that there are now about 122,000 electric-vehicle chargers at around 48,000 locations nationwide.

The Tritium factory is the latest in a string of manufacturing facilities Biden has highlighted in recent weeks as he’s sought to revive his political standing. Late last month, he appeared alongside Intel Corp. Chief Executive Officer Pat Gelsinger to celebrate the chipmaker’s decision to establish a $20 billion semiconductor factory in Ohio.

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(Bloomberg) — The cryptocurrency known as Unus Sed Leo, which was issued in part to recapitalize the Bitfinex exchange following a 2016 hack, surged more than 50% after the U.S. announced that most of the stolen funds were recovered.  

The firm iFinex, which operates Bitfinex and is affiliated with the Tether stablecoin, issued Leo in 2019 to beef up its coffers after a series of blows, including the hack in which it lost Bitcoin currently valued at $4.5 billion. In its white paper explaining Leo, Bitfinex promised that if the funds from the hack are ever recovered, it will use an amount equal to at least 80% of recovered net funds to repurchase and burn outstanding LEO tokens within 18 months of the funds’ recovery. Bitfinex confirmed its commitment to use the funds in this way in a statement Tuesday.   

Leo’s price jumped 59% to $7.91, according to data on CoinMarketCap. That has swelled the total market value of the token to about $7.2 billion, up from less than $2 billion when it was issued. U.S. residents weren’t allowed to participate in the initial token sale. Bitcoin fell about 2.3% to $43,134.

The Department of Justice announced Monday that it recovered $3.6 billion worth of Bitcoin from the hack in the largest financial seizure ever, and arrest two people. 

“This is very likely to have a major impact on future sophisticated and institutional investors evaluation of counterparty risk in the space,” said Stephane Ouellette, chief executive and co-founder of institutional crypto-platform FRNT Financial. “To know that even a hack from a more nascent time in the industry 6-years ago can be resolved will be mind-changing insight for many.”

In a briefing for reporters, Justice Department officials said they plan to establish a court process for victims to reclaim the stolen Bitcoin.

If history is any guide, any recovery may take time. Creditors of the defunct crypto exchange Mt. Gox are still waiting to receive reimbursements under a plan that became final and binding in November. Mt. Gox was once the world’s biggest Bitcoin exchange, until it closed in early 2014 after losing the coins of thousands of customers. 

Following the 2016 hack, Bitfinex created BFX tokens, and gave them to affected customers at the rate of one coin for each $1 lost. Within eight months of the security breach, Bitfinex’s parent company, iFinex, redeemed all the BFX tokens with dollars or by exchanging the cryptocurrency for shares of its capital stock. Bitfinex also created a tradeable RRT token for certain BFX holders that converted BFX tokens into shares of iFinex.

Once Bitfinex gets the recovered funds, it’s now promising to make a distribution to RRT holders of up to one dollar per RRT, which may or many not belong to original customers who lost their Bitcoin. Price of RRT tokens trading on Bitfinex exchange has tripled on the news.

(Updates with information on Bitfinex’s RRT token beginning in the eighth paragraph.)

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(Bloomberg) — Technology companies that aren’t licensed as banks shouldn’t offer crypto stablecoins, according to U.S. Treasury Undersecretary for Domestic Finance Nellie Liang.

Liang told lawmakers on the House Financial Services Committee that firms issuing the tokens to let people pay for goods and services should face the heightened scrutiny that lenders receive under U.S. rules. Her comments come after Meta Platforms Inc.’s Facebook last month abandoned plans for a stablecoin project that drew fierce opposition from Washington.

Concerns that stablecoins are insufficiently regulated have proliferated since 2019 when U.S. regulators expressed unease over Facebook’s plans to establish one that could have been used by billions of the company’s social-media users. On Tuesday, Liang said there was an “urgent” need for Congress to pass legislation focused on the fast-growing corner of crypto.

“This is an urgent issue given the rapid growth of this market,” Liang said in an interview before the hearing. In testimony she said the market value for the assets has exploded to about $175 billion from roughly $5 billion at the start of 2020. 

Stablecoins are a form of digital currency typically pegged to the U.S. dollar or other fiat currency. 

The call for congressional action by Liang follows a report last year from a group of top U.S. regulators known as the President’s Working Group on Financial Markets that called for stablecoins to be regulated more like banks. 

Treasury has been in touch with congressional offices and a number are working on proposals, according to Liang. Senator Pat Toomey of Pennsylvania, the top Republican on the Senate Banking Committee, has released a blueprint for future legislation. Still, it’s unclear if Republicans, like Toomey, and Democrats will be able to find enough common ground to advance a bill anytime soon.  

Maxine Waters, who chairs the committee, said her panel will continue to study stablecoins and the potential risks they pose to the U.S. financial system and investors. “Regulators and policymakers must work to ensure that any innovation in this space is responsible–that it provides robust consumer and investor protection, that it mitigates environmental impact, and that financial inclusion is front and center,” said Waters. 

Meanwhile, Patrick McHenry, the top Republican on the committee, said policy makers should focus on the possible benefits of stablecoins, not just the risks. He also pushed back against the notion that issuers should be banks. That would be a “major obstacle” to fostering innovation in this emerging space, he said.  

During the Tuesday hearing, Liang said it’s unlikely that U.S. regulators would preempt congressional action by designating stablecoin issuers as systemically important financial institutions, a tag that would saddle them with a range of onerous new requirements. Such a designation by the Financial Stability Oversight Council, which includes Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Securities and Exchange Commission Chair Gary Gensler, would mark the firms as posing a serious risk to the economy. 

“In the current environment, I don’t see that FSOC would take such actions,” she said. 

Prior to the hearing, Liang told Bloomberg that legislation and regulatory clarity is needed for the industry to flourish and for investors to be adequately protected. 

“We hurt both innovation and we increase risks if legislation is not passed,” Liang said.  The regulators’ report last year said that despite the concerns, stablecoins have the potential to make payments cheaper and faster. 

Regulators currently don’t have the authority to address all of the risks, so Congress needs to step in to close the “regulatory gaps,” she said. 

Liang said she anticipates the White House will offer more details on an administration-wide strategy for digital assets in a few weeks. Bloomberg previously reported that the Biden administration is preparing to take a more central role in overseeing cryptocurrencies, aiming to release an executive order as soon as this month.

That broader effort will expand beyond financial stability — a main focus of the stablecoin report — to examine issues such as the use of tokens in illicit finance, financial inclusion, and the importance of U.S. leadership in the global financial system, Liang said.  

(Updates with Liang comments on the possibility of FSOC designation in 10th and 11th paragraphs.)

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(Bloomberg) — The U.S. government’s minimum-wage enforcers plan to zero in on the warehouse and logistics industry, amplifying scrutiny of a sector criticized during the pandemic for its labor practices.

A combination of explosive growth, low wages and the widespread use of contract staff demands that greater attention be paid to how the sector treats its “essential workers,” Jessica Looman, the acting administrator of the U.S. Department of Labor’s Wage and Hour Division, said in an interview Tuesday. “We want to make sure that the outcome, as we’re continuing to move out of this pandemic, hasn’t been an opportunity for greater exploitation of workers, but instead that we have learned a lot of lessons and it can be an opportunity to empower more workers.”

In an emailed statement, Looman’s agency pledged “vigorous enforcement” as part of a new initiative stepping up efforts to ensure warehousing and logistics workers are paid the required hourly wage and overtime pay, can take time off as prescribed by law and aren’t retaliated against for exercising their rights. The agency has been conducting 70 investigations in the warehouse and logistics sector in recent months, and three-quarters of those it resolved found violations of the law, a spokesperson said.

The new initiative will include a major focus on misclassification of workers as independent contractors rather than employees — an issue the Biden administration has vowed to address more forcefully. “One of our biggest challenges is that there are business models that are designed specifically to call a worker an independent contractor in order to avoid the payment of minimum wage and overtime,” Looman said.

Applying an Obama-era concept called “strategic enforcement,” Looman’s division aims to use its limited resources to investigate and foment change in industries prone to widespread violations, rather than waiting for workers to file complaints and then just embarking on ad hoc, one-off probes. 

“There is this incredible impact that we can have when workers understand their rights, employers understand their obligations, and we back all of that up with a strong enforcement program,” Looman said. “It really can change the dynamics in a sector and it can empower workers.”

Warehouse working conditions have drawn more attention during the pandemic because many workers risked their health and lives serving customers sheltering at home. Employees have mounted strikes and pursued litigation around the country over safety concerns. They also secured a new law in California that requires companies to disclose their facilities’ productivity quotas and prohibits employers from enforcing them in ways that prevent workers from using the bathroom.

Amazon.com Inc., which benefited from a surge in online shopping during the pandemic, has drawn much of the criticism. While the company spent billions to help Covid-proof its facilities, employees staged walkouts demanding greater protections. A group of workers also filed a lawsuit claiming Amazon was putting them and their families at risk. A federal judge dismissed the complaint, and Amazon denied the allegations, but the employees have asked an appeals court to revive it.

Amazon warehouse workers in New York and Alabama have mounted union campaigns, as have Los Angeles port truckers, who claim XPO Logistics Inc. illegally misclassified them as contractors. (XPO denied wrongdoing.)

The Wage and Hour Division announced last week that it aimed to recruit 100 new investigators, with more hiring to come later this year. Looman, a former Minnesota building trades labor leader, has been running the agency for a year. President Joe Biden’s nominee to permanently lead the agency is David Weil, who served in the same role during Barack Obama’s second term after previously spearheading a report for the division advocating the strategic enforcement approach.

(Updates with recent investigations in third paragraph.)

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(Bloomberg) — It’s a testing time for crypto exchanges to be making their Super Bowl ad debuts.

Recruiting new users can be simple when prices are skyrocketing. It’s a bit harder after tokens like Bitcoin and Ethereum have lost some steam, now down 35% from all-time highs.

Still, FTX Trading Ltd. and Crypto.com are due to run spots during the matchup between the Los Angeles Rams and the Cincinnati Bengals on Sunday when more than 100 million viewers are expected to tune in.

A Super Bowl ad can catapult a brand into the mainstream consciousness, which could help the exchanges boost crypto adoption coming off a painful downturn that’s made even some of the biggest advocates skittish about a potential bear market. A jump in new users after the game would help keep the platforms — dependent on trading volumes — growing.

That’s likely one reason they’re willing to pay top dollar for ad space with a 30-second slot this year costing as much as $7 million, an all-time high. But the companies are no stranger to the high cost of advertising. At least $112.9 million has been spent on national crypto-related ads since the start of 2020, according to iSpot.tv data provided by John Cassillo, a TVREV analyst.

Crypto.com has deployed about $65 million on its advertising campaign with actor Matt Damon. FTX has invested $21 million on multiple campaigns, including a handful with now-retired quarterback Tom Brady. And SoFi Technologies Inc. — the namesake of Sunday’s stadium — has spent roughly $18 million on ads. However, SoFi notably will not be running a Super Bowl spot this year, according to a spokesperson.

With Bitcoin now more than a decade old, cryptocurrencies may have exhausted their market for early adopters, R.A. Farrokhnia, a Columbia Business School professor, said.

“For these companies who are providing some foundational services — primarily exchanges or those who let you create a wallet — in order to grow, they need more volume,” said Farrokhnia, who is also executive director of the university’s fintech initiative. “You have to convince consumers to start coming into this ecosystem.”

Read more: Crypto and Sports: A Marriage Made in … Well, We’ll See

The recent boom in crypto is often compared to the speculative dot-com era of the late 1990s, which reached a fever pitch at the Super Bowl in 2000 when ill-fated companies like Pets.com made their debut only to weeks later see their values plummet in the stock market crash. 

The market for cryptocurrencies is digging itself out of a major decline after losing as much as $1.1 trillion in value at one point in January. Furthermore, policymakers remain wary of the volatile asset class, with President Joe Biden set to soon release an executive order on regulation.

However, such concerns are unlikely to make it into Sunday’s ads, which are expected to be uplifting and fun on the whole compared to last year’s pandemic themes. FTX has rolled out teasers for its commercial featuring historical figures, including a fictional Thomas Edison who’s hoping to win Bitcoin from the platform’s giveaway tied to the football game. Likewise, Crypto.com is planning a surprise reveal.

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(Bloomberg) — Bill Gates, the billionaire philanthropist whose foundation has focused on efforts to fight the coronavirus, is planning a May 3 release for a book on how to ensure that the Covid-19 pandemic is the last great global plague.

“Whenever I see the suffering that Covid has created — every time I read about the latest death toll or hear about someone who lost their job or drive by a school that is closed — I can’t help but think: We don’t have to do this again,” he wrote in a blog post announcing the publication of “How to Prevent the Next Pandemic.”

The book will cover lessons learned from the pandemic, as well as tools and innovations needed to save lives and stop pathogens early. It will discuss his views on vaccines and on what it has felt like to become the target of conspiracy theories.

In January 2021, the Microsoft Corp. co-founder outlined an ambitious plan to stop the next pandemic, calling for a global alert system, massive testing, a cadre of 3,000 “first responders” ready to spring into action and tens of billions of dollars of annual spending.

The Gates Foundation has spent more than $2 billion helping fund the global response to the Covid-19 outbreak. That money has gone to groups like the African Centres for Disease Control and Prevention to boost testing in sub-Saharan Africa, as well as to the Coalition for Epidemic Preparedness Innovations to help fund the development of lower-cost vaccines.

The Seattle Flu Study — an initiative funded by Bill Gates’s private office, Gates Ventures — identified the first case of Covid-19 in the U.S. that hadn’t come from overseas. Gates himself came under fire during the pandemic when he downplayed the role that intellectual property had in preventing people from getting shots in developing countries. Anti-vaccine activists and fringe conspiracy theorists also have targeted the entrepreneur, with some saying he seeded the virus for his own purposes.

The good news is that progress on vaccines and expertise gained in combating respiratory illnesses will help prevent a future crisis, Gates said.

Plus, Covid has shown the world the cost of failure. “If we make the right choices and investments, we can make Covid-19 the last pandemic,” he said. 

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(Bloomberg) — Peloton Interactive Inc. is slashing jobs and cutting production plans, but one part of the company is safe: its famous — and famously well-compensated — instructors.

In announcing plans to cut about 2,800 jobs globally on Tuesday, Peloton co-founder John Foley said the move won’t affect its roster of instructors. The number of classes and range of options won’t change either, he said in a letter to shareholders.

Peloton’s instructors are the public face of the company — and credited with building the fitness company’s cachet. Their fame only grew during the pandemic, when they spurred stuck-at-home customers to stay fit during lockdowns. But with people now returning to traditional gyms, Peloton is struggling with how it can stay relevant. 

People familiar with the company said last year that senior instructors are paid upward of $500,000 annually. And some of them have used their celebrity and cult-like social media followings to spin off personal ventures. Head instructor Robin Arzon and Cody Rigsby, who was a contestant last year on “Dancing with the Stars,” have Instagram followings of about 1 million each. The pair, along with Ally Love with 827,000 followers, are developing a special Adidas AG apparel collection.

Meanwhile, Peloton’s cutbacks will eliminate about 20% of its corporate jobs. It’s also scaling back warehouses and delivery teams, and relying more on third-party logistics companies. And the company scrapped plans for a much-touted factory in Ohio.

“These decisions, particularly those related to our impacted Peloton team members, were not taken lightly,” said Foley, who lost a job himself on Tuesday. He stepped down as chief executive officer, but becomes executive chair.

Laid-off employees will get severance payments and benefits, including one that raised eyebrows: a free Peloton membership for the next year.

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(Bloomberg) — Twitter Inc. told a U.S. senator it is cutting ties with a European technology company that helped it send sensitive passcodes to its users via text message.

The social media firm said in a disclosure to U.S. Senator Ron Wyden, a Democrat from Oregon, that it is “transitioning” its service away from working with Mitto AG, according to a Wyden aide. 

A co-founder of Mitto operated a service that helped governments secretly surveil and track mobile phones, according to former employees and clients, as Bloomberg News and London-based Bureau of Investigative Journalism reported in December. Twitter cited media reports as the motivating factor behind its decision, the Wyden aide said. 

Several other companies have allegedly already cut ties with Mitto. In recent weeks, messaging companies Kaleyra and MessageBird have both ceased commercial relationships with Mitto, according to three people familiar with the matter. 

A Twitter representative declined to comment. 

A spokesman for Mitto, which is based in Zug, Switzerland, said in an emailed statement that the company “does not disclose information about its business partners, through any channel – official or unofficial – full stop. Generally, such agreements are mutual in nature, with both parties agreeing to protect the privacy and integrity of the other.”

Closely held Mitto works with leading telecommunications companies to deliver text messages in bulk to billions of phones around the world, according to its website and promotional documents. Mitto sends out automated text messages for such things as sales promotions, appointment reminders and two-factor security codes needed to log in to online accounts.

However Mitto’s co-founder and chief operating officer, Ilja Gorelik, was also allegedly selling access to Mitto’s networks to secretly locate people via their mobile phones, and in some cases obtain their call logs, Bloomberg reported. The Mitto venture also allegedly involved exploiting weaknesses in a telecommunications protocol known as SS7, or Signaling System 7, a sort of switchboard for the global telecommunications industry. 

A Mitto representative previously said that the company had no involvement in any surveillance business and had launched an internal investigation “to determine if our technology and business has been compromised” and would take corrective action if necessary. Mitto representatives allegedly informed some clients that Gorelik was no longer involved at the company.

 

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