NordicTrack CEO Scott Watterson forced out in battle with Peloton
The maker of NordicTrack exercise bikes and treadmills got a financial lifeline this month — but only after the struggling Peloton rival’s founder agreed to step down as chief executive, The Post has learned.
Investors insisted that 66-year-old Scott Watterson — a hard-charging billionaire entrepreneur who founded the company in 1977 after doing a stint as a Mormon missionary in Asia — relinquish control of the daily management of NordicTrack’s parent company, iFIT Health & Fitness, sources close to the situation said.
IFIT’s new backers likewise demanded control of the board, which meant booting longtime directors from the Church of Latter-day Saints who were close to Watterson, sources told The Post. Watterson remains chairman — but his wings have been clipped, the sources said.
Michael Phelps bill
A key beef was over iFIT’s expenses, which ballooned over the past year as Watterson scrambled to outgun archrival Peloton by pouring millions of dollars into a marketing push that tapped Olympic swimming legend Michael Phelps.
Some investors griped that Watterson — who, they claim, ran the company like a family business — racked up a massive tab with a risky plan to pay it off with proceeds from an IPO that ended up getting scrapped in October. IFIT expected to raise $650 million in the public offering.
Once valued at more than $10 billion, iFIT last year was forced to shed hundreds of workers in a series of layoffs in a bid to slow its cash burn as pandemic-driven demand for exercise bikes from NordicTrack and Peloton alike dried up last fall.
Both companies were bogged down in patent lawsuits against each other as well as other fitness companies.
One source close to the company now pegs iFIT’s market value closer to $1.5 billion.
“It needed a fresh set of eyes and for someone to manage the business professionally,” one source close to the company told The Post.
The investors – L Catterton and Pathlight Capital – wanted assurances that new leadership would be installed before they parked their millions in the Logan, Utah-based company, according to the source. They are now in discussions with candidates to succeed Watterson as CEO, the source said.
It’s a different story than the one iFIT told after it secured the $355 million investment in early March, announcing that Watterson would be stepping down as CEO “as previously planned.”
His 35-year-old son Mark, who is chief experience officer, was promoted to co-president along with iFIT’s chief financial officer, Steve Barr.
‘So many Wattersons’
The shuffle follows investor complaints that Watterson ran iFIT like a fiefdom –according to one source, Scott has been known to “dress down his employees in front of the board of directors” — and he doled out plum gigs to 11 family members, according to public filings.
Indeed, Scott himself was poised to receive $35 million upon completion of the IPO, which was ultimately postponed due to “adverse market conditions,” according to securities filings. The flopped IPO didn’t stop iFIT from forgiving $53.2 million worth of loans to family member employees right before the company’s IPO registration, filings show.
“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,” another source with knowledge of the investment terms said.
Watterson’s 62-year-old brother David, formerly chief strategy officer, is no longer a director nor does he hold an executive position. It’s Scott’s son Mark that Watterson hopes will take the reins of the company eventually, the sources said.
His three other sons — Blake, chief operating officer; Eric, chief marketing officer; and Nick, a product manager; will continue in their roles and are well regarded by the investors, but are not yet viewed as CEO material, sources said.
Pathlight invested $325 million and L Catterton – backed by French luxury giant LVMH’s billionaire chairman 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.
‘Mormon brotherhood vanished’
As exclusively reported by The Post, iFIT was facing down a potential bankruptcy this year due to a lawsuit from Pamplona Capital Management, which had demanded immediate repayment of a 2019, $200 million loan and $100 million in interest, alleging that iFIT cut a deal to acquire a Chinese manufacturer that subordinated Pamplona’s loan to the company and violated the terms of its agreement with iFIT.
IFIT this month said it settled the dispute without disclosing details. Sources said the settlement was the key to unlocking the $355 million as Pathlight and L Catterton did not want the liability hanging over the company.
L Catterton has effectively taken over the management for now — and was likely the reason that Scott agreed to the leadership changes, citing friction between Watterson and Pamplona, according to a source.
The board, meanwhile, has been shrunk, with L Catterton holding three seats and the rights to install three independent directors. Gone are two high-ranking members of the Mormon church: Gary Stevenson, who’d co-founded iFIT and is now the 12th Apostle of the church; and Bob Gay, an investment banker who also has held church leadership positions. IFIT directors had been instructed to refer to Stevenson as “Elder Stevenson” at board meetings, the source told The Post.
“All that Mormon brotherhood vanished from the board,” the source said. “They were a big issue. They all stuck together and kept propping Scott up,” 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 speaks fluent Mandarin, according to Forbes.
When iFIT announced plans to go public last fall, the local press pointed out that Stevenson could become a billionaire in the process. The Salt Lake Tribune also pointed out that serving on a corporate board “would appear to violate long-standing church policy.”
A church spokesperson responded that Stevenson had received a special dispensation from church authorities, “resulting from his legacy shareholdings and his role as a co-founder of the corporation.”