Peloton IPO: 1.4 Million Users, $195 Million in Losses, and an Uncertain Valuation

August 27, 2019, 10:53 PM UTC

Peloton Interactive Inc., the home exercise startup, has filed for an initial public offering that will likely be among the year’s biggest.

The New York-based company listed its offering size as $500 million in a filing Tuesday with the U.S. Securities and Exchange Commission. That amount is typically a placeholder that will change.

Founded in 2012, Peloton describes itself as the “largest interactive fitness platform in the world” with more than 1.4 million members, according to the filing. The company sells exercise bikes and treadmills that have television screens connected to the internet for showing its own workout programs. Its basic “connected fitness” subscription costs $39 a month and the bikes start at $2,000.

The offering is likely to be in the top tier of a strong year for IPOs. Almost $39 billion has been raised in 125 listings on U.S. exchanges in 2019, according to data compiled by Bloomberg. That’s on track to be the best year since 2014 when Alibaba Group Holdings Ltd. set the all-time global IPO record with its $25 billion offering including the greenshoe allotment.

Listings this year have included several tech and tech-related unicorns—startups valued at more than $1 billion. The biggest IPO of the year was ride-hailing giant Uber Technologies Inc.’s $8.1 billion listing in May, followed by five others raising more than $1 billion.

Sales, Losses

Like many of those companies, Peloton is unprofitable. The company lost $196 million on sales of $915 million during the 12 months ended June 30, according to its filing. That compared with a loss of $48 million on $435 million in sales during the same time period a year earlier.

The company warned in its filing that it may not turn a profit or maintain profitability in the future.

People familiar with Peloton’s plans have said it is seeking a valuation of $8 billion or $10 billion. Peloton was valued at about $4.15 billion when it raised $550 million last year from backers including the venture capital firm TCV, Kleiner Perkins, Tiger Global Management and GGV Capital.

Peloton is hitting a big trend in fitness—group training enabled by technology. The most popular of its products is the WiFi-enabled stationary bicycle that streams live and recorded classes from its New York-based studio.

‘Strong Retention’

Peloton contends its service is sticky and that 92% of its connected fitness products it has sold still had an active subscription as of June 30.

The company has risen to prominence in a crowded fitness tech industry, which also includes class-based rivals SoulCycle and Flywheel Sports.

Flywheel in particular has struggled to find its footing as companies look to monetize the specialty fitness craze. Flywheel, which is being sued by Peloton for patent infringement, is shutting down more than a quarter of its cycling locations after being taken over by its lender, Kennedy Lewis Investment Management LLC.

Tariff Risks

Peloton acknowledges that it operates in a young, brutally competitive market in the part of its IPO prospectus where it details the risks it faces.

“We may be unable to attract and retain subscribers,” it said. “The market for our products and services is still in the early stages of growth.”

The tariffs stemming from the U.S.-China trade war could also take a toll on its business, because its products include some parts from China, it said.

“These tariffs have an impact on our component costs and have the potential to have an even greater impact depending on the outcome of the current trade negotiations,” Peloton said.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading the offering. Peloton plans to list its shares on the Nasdaq Global Select Market under the symbol PTON.

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