Peloton reveals widening losses in filing for IPO
Peloton disclosed its prospectus for its hotly anticipated initial public offering on Tuesday as the manufacturer of high-end treadmills and at-home cycling equipment joins a long list of lossmaking private groups seeking to float on the stock market.
The company, known for its stationary bikes that retail for almost $2,000, said its losses had climbed nearly fourfold to $196m in the year to June 30. The documents showed Peloton had burnt through cash at its fastest clip since its founding despite revenue doubling from the previous year to $915m.
John Foley, Peloton’s co-founder and chief executive, pitched the company as “so much more” than a maker of fitness equipment in a letter to prospective investors.
“It is no secret that exercise makes us feel good. It’s simple science: exercising creates endorphins and endorphins make us happy,” he wrote. “On the most basic level, Peloton sells happiness.”
Peloton had filed its prospectus confidentially with US securities regulators in June. It was valued at $4.15bn in August last year when the venture-capital firm TCV led a $550m funding rounding.
The group said it planned to raise $500m in the IPO, although that figure is a place holder used to calculate filing fees and is likely to change.
Peloton on Tuesday disclosed it would offer investors in its IPO shares of class A common stock, which carry a single vote per share. The company also has supervoting class B common shares, which carry 20 votes apiece, giving executives such as Mr Foley and early backers including TCV, Tiger Global, Fidelity and True Ventures control of Peloton.
Peloton said that the class B shares would automatically convert into class A common stock 10 years after its IPO is completed, or on a vote in favour of a conversion by more than two-thirds of the class B shareholders.
Investors have increasingly taken aim at companies with multi-share classes, which often trigger corporate governance red flags. The Council of Institutional Investors has warned that the misalignment of ownership and voting rights presents a risk to the “health and fairness of capital markets” and has pushed companies to adopt so-called sunset provisions that remove supervoting stock within a set number of years.
A wave of lossmaking tech-related groups have rushed to the public markets this year including the ride-hailing companies Uber and Lyft, the online scrapbooking group Pinterest and the workplace communication company Slack. WeWork, the lossmaking office space provider, is seeking to sew up its own IPO as soon as next month.
Buoyant valuations for US stocks have attracted several of the marquee listings, as executives at some private companies seek to finalise their offerings before market volatility deters investors from IPOs.
Peloton has sought to diversify its business away from the indoor bicycles that stream live classes on 22-inch touchscreens at the front of the bike. It now makes treadmills and offers yoga, running and boot camp classes for subscribers.
The company said it had collectively sold 577,000 indoor bicycles and treadmills since they were introduced in 2014 and 2018, respectively. It also counts 102,000 subscribers for its digital offering, which costs $19.49 a month.
Peloton plans to list its shares on the Nasdaq exchange under the ticker symbol PTON.