This morning Peloton announced a plan to sell $1 billion of their Class A common stock – a sign that they need to raise money in light of recent tough weeks for the company.
Peloton put out a press release with the details:
Peloton Interactive, Inc. (“Peloton”) (Nasdaq: PTON) today announced that it has commenced an underwritten public offering of $1 billion of shares of its Class A common stock. In addition, Peloton is expected to grant the underwriters of the offering a 30-day option to purchase up to an additional $150 million of shares of Class A common stock at the public offering price, less underwriting discounts, and commissions. The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed.
The press release also explains that associates of Durable Capital Partners LP and TCV, as well as accounts advised by T. Rowe Price Associates have indicated interest in purchasing shares.
CNBC is also reporting on the news, providing additional context about Peloton’s stock price:
Stock offerings are often pursued by public companies to take advantage of a growing share price, but Peloton’s market value has plunged this year. Its shares were down around 3% in extended trading Tuesday after the news, having fallen nearly 70% year to date. Shares had closed Monday down 3.5%, after touching a fresh 52-week low of $46.70 earlier in the day.
This news comes after a challenging past few months – and weeks, in particular – for Peloton. Their Q1 2022 earnings call at the beginning of the month revealed softening demand and caused the stock price to drop 30% overnight. This was followed by a hiring freeze and two “all-hands on deck” meetings, during which CEO John Foley explained that the pandemic surge had caused the company to become “a little undisciplined.”
The stock offering announced this morning runs contrary to what Chief Financial Officer Jill Woodworth told investors just a few short weeks ago on the Q1 2022 earnings call. Answering a question about the potential of raising money, she said: “I think just cutting to the chase we don’t see the need for any additional capital raise based on our current outlook.”
Peloton is dumping money into marketing as we enter the holiday season, with a new holiday campaign and Black Friday discounts.
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