NordicTrack CEO Scott Watterson forced into fight with Peloton
Exercise bike and treadmill maker NordicTrack got a financial lifeline this month – but only after the founder of Peloton’s struggling rival agreed to step down as chief executive, The News has learned. Post.
Investors have insisted that Scott Watterson, 66 – a billionaire entrepreneur who founded the company in 1977 after a stint as a Mormon missionary in Asia – relinquish control of the day-to-day management of NordicTrack’s parent company, iFIT Health & Fitness, sources familiar with the matter said.
IFIT’s new backers also demanded control of the board, which meant the departure of longtime Church of Latter-day Saints trustees who were close to Watterson, sources told Reuters. Post. Watterson remains president – but his wings have been clipped, the sources said.
Bill Michael Phelps
A key beef was over iFIT’s spending, which has skyrocketed over the past year as Watterson raced to outdo rival Peloton by pouring millions into a marketing campaign that appealed to the Olympic legend from swimming Michael Phelps.
Some investors have claimed Watterson – who they say ran the business like a family business – racked up a huge tab with a risky plan to pay it back with proceeds from an IPO that ended up being scrapped in October . IFIT planned to raise $650 million in the public offering.
Once valued at more than $10 billion, iFIT last year was forced to lay off hundreds of workers in a series of layoffs in a bid to slow its cash burn as demand for exercise bikes from NordicTrack and of Peloton, caused by the pandemic, dried up last fall.
Both companies have been mired in patent lawsuits against each other as well as other fitness companies.
A source close to the company now pegs iFIT’s market value at over $1.5 billion.
“It needed a fresh look and someone to run the business professionally,” a source close to the business told The Post.
The investors – L Catterton and Pathlight Capital – wanted assurances that new executives would be installed before parking their millions in the Logan, Utah-based company, the source said. They are currently in discussions with candidates to succeed Watterson as CEO, the source said.
It’s a different story than the one told by iFIT after it secured the $355 million investment in early March, announcing that Watterson would step down as CEO “as planned.”
His 35-year-old son, Mark, who is chief experience officer, was promoted to co-chairman along with iFIT chief financial officer Steve Barr.
“So Much Watterson”
The shakeup follows investor complaints that Watterson ran iFIT like a fiefdom — according to a source, Scott is known for “dressing his employees in front of the board” — and he handed out plum gigs to 11 members of the family, according to public filings.
Indeed, Scott himself was set to receive $35 million at the end of the IPO, which was ultimately postponed due to “adverse market conditions,” according to the filings. The failed IPO didn’t stop iFIT from forgiving $53.2 million in employee loans from family members just before the company’s IPO was filed, according to filings.
“iFit is a billion dollar company, but if you look at the names of the executives, there are so many Wattersons in the C-suite,” said another source with knowledge of the investment terms.
David, Watterson’s 62-year-old brother, a former chief strategy officer, is no longer a director and no longer holds an executive position. It’s Scott’s son, Mark, whom Watterson hopes will eventually take over the reins of the business, the sources said.
His other three sons – Blake, COO; Eric, Marketing Director; and Nick, product manager; will continue in their roles and are well regarded by investors, but are not yet considered CEO material, sources said.
Pathlight invested $325 million and L Catterton – backed by the billionaire chairman of French luxury giant LVMH, Bernard Arnault – invested $25 million, according to a source close to the company. Scott Watterson, who is worth $1.6 billion according to Forbes, invested $5 million, the source said. Pathlight did not respond to requests for comment, and L Catterton declined to comment.
IFIT did not respond to repeated requests for comment.
“The Mormon Fellowship Has Disappeared”
As reported exclusively by The Post, iFIT was facing potential bankruptcy this year due to a lawsuit from Pamplona Capital Management, which demanded immediate repayment of a $200 million loan in 2019 and $100 million of interest, alleging that iFIT entered into an agreement to acquire a Chinese manufacturer that subordinated Pamplona’s loan to the company and violated the terms of its agreement with iFIT.
IFIT said this month it had settled the dispute without disclosing details. Sources said the settlement was key to unlocking the $355 million, as Pathlight and L Catterton did not want the liability on the company.
L Catterton has effectively taken over as manager for the time being – and that’s likely why Scott agreed to the managerial changes, citing friction between Watterson and Pamplona, a source says.
The board, meanwhile, has been reduced, with L Catterton holding three seats and the right to install three independent directors. Gone are two high-ranking members of the Mormon Church: Gary Stevenson, who co-founded iFIT and is now the church’s 12th Apostle; and Bob Gay, an investment banker who has also held leadership positions in the church. IFIT trustees had been instructed to refer to Stevenson as “the elder Stevenson” at board meetings, the source told the Post.
“All that Mormon fellowship has disappeared from the picture,” the source said. “They were a big deal. They all stuck together and continued to support Scott,” the source said.
Watterson and Stevenson served as Latter-day Saint missionaries in Asia earlier in their careers and formed the fitness company — then called Weslo Inc. — together in 1977. Watterson is fluent in Mandarin, according to Forbes.
When iFIT announced plans to go public last fall, local press pointed out that Stevenson could become a billionaire in the process. The Salt Lake Tribune also pointed out that serving on a board “would appear to violate longstanding church policy.”
A church spokesperson responded that Stevenson had received a special dispensation from church authorities, “resulting from his legacy holdings and his role as a co-founder of the company.”