Peloton’s Late 10-K Reveals SEC Investigating Tread+ Disclosures

The SEC is also probing “other matters” as the fitness brand’s auditor scrutinizes its revenue recognition.

September 11, 2022

One week after announcing it would not file its annual report on time due to potential conflict with its auditor, Peloton (PTON), a connected fitness brand, revealed it soon expects to be fined for not recalling its Tread+ product sooner. In May 2021, the Consumer Product Safety Commission (CPSC) urged people to stop using the treadmills after a 6-year old child died after being pulled under.

In its belatedly filed annual report, Peloton disclosed it expects to be fined for the way it handled the recall. In May 2021, Peloton’s former CEO John Foley apologized for initially refusing to cooperate with the CPSC. The latest annual report states that despite disagreeing, Peloton is “engaged in ongoing confidential discussions with the CPSC.”

Later in the filing— after at least two similar warnings regarding the expected CPSC fine— Peloton also revealed the SEC is now investigating whether the company’s disclosures related to the Tread+ recall were adequate. However, the disclosure suggests the company is also being scrutinized by the SEC for unrelated matters:

“...SEC is investigating our public disclosures concerning the Tread+ recall as well as other matters.”

Notably, Peloton’s auditor flagged revenue recognition as a new critical audit matter. Peloton’s auditor, Ernst & Young (EY), noted that, among other things, it reviewed Peloton’s revenue recognition activity for “...any material or unusual transactions and obtained supporting evidence of delivery, as needed.”

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