By
Temitope Olatunji
March 11th, 2024
Peloton’s first day on the stock market was disappointing, to say the least, and it ended as the third-worst IPO performer. PTON stock kept on sliding throughout the day, ending on a much worse note than it started.
The initial public offering (IPO) for Peloton Interactive Inc., was launched yesterday with the hopes that the offering will bring much-needed growth to the company which has consistently been recording losses for a while. As we reported yesterday, Peloton announced that it will be offering 40 million shares of its Class A common stock on the Nasdaq, priced at $29 each, in an effort to raise about $1.2 billion. However, Peloton (PTON) investors ended the day disappointed as trading didn’t at all go as expected.
Firstly, PTON began the day at $27, almost 7% lower than the expected price. By afternoon, prices had slid a full $10 percent below $26 and this decline continued throughout the day. By day’s end, PTON had shed at least 14% of its weight, to trade at $25. The poor performance of the PTON stock cost investors more than $900 million in capital, the third-worst mega-IPO performance only behind SmileDirectClub which lost 11% and ADT which lost 9.6%
In the 2019 fiscal year, Peloton has pulled in total sales of $915 million, a more than 100% increase from its 2018 fiscal year figure of $435. However, losses in the same period also jumped more than 5 times, from $47.9 million to $245.7 million. Even if this is taken care of by some miracle, the company is also facing a heavy copyright infringement lawsuit.
Back in March, the National Music Publishers’ Association (NMPA) filed a suit against Peloton, accusing the company of using more than 1,000 different songs for several of its exercise routines, without obtaining the required permission or any licenses.
At the time, the NMPA sought for damages to the tune of $150 million and shortly after the suit was filed, the songs which included music from Drake, Rihanna, Lady Gaga and Justin Timberlake, were pulled down much to subscriber disappointment. However, in a recent and surprising turn of events, the NMPA has amended the suit, saying that it discovered another 1,200 unpermitted songs, thus doubling damages to $300 million.
Peloton’s business revolves around exercise connected exercise equipment, which features live on-demand routines that users can follow on their workouts. The routines are only accessible via subscription which cost from $19 to $40 monthly, depending on preferred content. The company boasts of 1.4 million subscribers, 500,000 of which pay monthly fees consistently.
Even with all of its revenue and its high-end equipment – costing between $2,200 to nearly $4,300 – Peloton needs a serious boost to the company’s finances. The disappointing IPO puts Peloton on a list of companies such as Uber, WeWork, and Lyft, who have been plagued with similar IPO or financial issues and are currently struggling.
Regardless, there is still a chance that all hope is not lost as there have been multiple occurrences in the past, where companies have quite terrible IPOs but eventually more than makeup for the poor performance.
PTON closed at $35.76 with a $1,23 billion market cap.