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Peloton considers de-listing to draw a line under pandemic challenges

Peloton is considering de-listing from the stock exchange
Company is in talks with private equity houses
Rumours of de-listing led to a share bounceback
Company's borrowings are also being restructured
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University of Brighton
£23,144 to £25,138pa
location: Brighton, East Sussex, United Kingdom
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Peloton Interactive Inc is believed to be working to get its costs under control in a bid to align with the expectations of private equity investors as it considers de-listing.

The company’s rollercoaster ride from a valuation of around US$50 billion at the height of the pandemic to a US$1.3 billion valuation today has been well documented, as has its recent decision to restructure, close retail outlets and shed 400 staff – around 15 per cent of the workforce.

The move is as part of a plan to reduce its outgoings by US$200 million this year that will also see cuts to marketing, research and development, IT, and software.

The departure last week of CEO Barry McCarthy led shares to fall 16 per cent cent – even before this drop, they were down 47 per cent this year – however, a story published by CNCB addressing the delisting rumours saw this trend reverse, as the company enjoyed an 18 per cent increase in share value.

In addition to exploring a private equity sale, Peloton is also restructuring its borrowings in partnership with a group of banks, including JP Morgan Chase and Goldman Sachs. It had around US$1.7 billion of debt as at the end of Q1 this year, made up of a US$692 million term loan and US$991 million in senior notes, which fall due in February 2026.

In spite of its financial woes, Peloton is a substantial company in the sector by any measure, generating revenues of US$717.7 million in its fiscal third quarter alone and with 3.06 million connected fitness subscribers, placing it among the biggest fitness businesses globally. It’s predicting sales of around US$2.68 billion for the current financial year and says it will have around 2.96 million subscribers at year-end.

Apart from unrealistic post-pandemic growth expectations, Peloton’s biggest challenges have been a bewildering sequence of pivots and a series of recalls as a result of accidents – some of them fatal.

Pivots have included buying Precor for its manufacturing capacity, shutting this capacity down and outsourcing it, veering from a hardware to a software focus and from consumer to B2B – announcing partnerships with Hilton Hotels and Hyatt, for example – as it has tried to find new direction and sales volumes.

Accidents and recalls have included the death of a child on a treadmill and insider trading accusations which led to a legal action being brought against senior executives, with this court action still ongoing.

If private equity investors can see a way to revive Peloton’s fortunes by cutting costs and leverage potential that’s locked up in the business, it may be better off away from the glare of the public markets as it works to rebuild value.

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Peloton Interactive Inc is believed to be working to get its costs under control in a bid to align with the expectations of private equity investors as it considers de-listing.

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