Yesterday, Peloton announced on their investor page that they were going to offer $600 million in Convertible Senior Notes, which would be due in 2026. Investors would then have an option to purchase an extra $90 million in extra aggregate principal.
Later in the day, Peloton made a new announcement that the offering size was increased to $875 million in Convertible Senior Notes, with an extra $125 million in extra aggregate principal. This would result in $1 billion in cash for Peloton – although after discounts & commissions & expenses Peloton expected to net $854.6 million.
Peloton CEO John Foley congratulated his team on Twitter, stating “Congrats to @jillw33 and Dana Laidhold for their leadership w/ $1.0B for PTON “at 0% up 65%; best 5 year convertible terms in history of the convert market!” And of course, TY to our partners at @jpmorgan, @goldmansachs and J. Wood Cap”
~$71 million of the money will be used for the “cost of the capped call transactions”, while the rest will be used for whatever Peloton deems it necessary for.
The big question about this offering is: What does Peloton need the money for, or what do they plan to do with it?
Peloton itself stated the money would be “for general corporate purposes, which may include working capital, capital expenditures, including for the construction or expansion of facilities, and investments in and acquisitions of other companies, products or technologies that Peloton may identify in the future.”
The Motley Fool speculates that some of this cash would be used to pay for their recently announced $100 million investment to help speed up shipping and cut down on delay times. They also point out it could be used to pay for the recently announced $420 million Precor acquisition.
Some have speculated whether this might be Peloton preparing for another big acquisition (with some dreaming it might be Peloton acquiring Tonal).
Others have reported they think this transaction is simply Peloton raising money while they can while interest rates are favorable and they can do it cheaply.