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Highlights
- Peloton said it plans to sell around 23.9 million shares of its Class A common stock for US$46 per share, which will fetch about US$1.07 billion.
- Tuesday’s price rise was Peloton’s biggest one-day gain since May 2020, said analysts.
- According to analysts, Peloton hopes to restore the optimism in the company by utilizing the proceeds to beef up growth, even though the move dilutes its current holdings.
Peloton Interactive Inc. (NASDAQ:PTON) stock jumped more than 15% on Tuesday after the company announced to sell 23.9 million shares worth US$1 billion.
The offering drew massive investor interest. The stock closed at 15.5% up at US$54.85 at 4:00 pm ET on Tuesday.
Peloton said it plans to sell around 23.9 million shares of its Class A common stock for US$46 per share, which will fetch about US$1.07 billion. The fitness equipment maker hopes to shore up cash amid a slide in its product sales. Peloton’s market value has plunged this year.
Tuesday’s price rise was Peloton’s biggest one-day gain since May 2020, said analysts. The stock declined 45% since the company slashed its annual revenue guidance by up to US$1 billion on Nov 4.
It also had lowered its growth estimates for subscribers and profit margins. On Monday, the stock had closed at 3.5% down, at US$47.49 after notching a 52-week low of US$46.70 earlier in the day.
Although it has been a disappointing year for the Peloton stock, the continued growth in the in-home fitness segment offers hope of making a solid comeback.
According to some analysts, Peloton hopes to restore the optimism in the company by utilizing the proceeds to step up growth, even though the stock sale move dilutes its current holdings.
The company said Durable Capital Partners LP, TCV, and accounts advised by T. Rowe Price Associates expressed interest in buying shares. Meanwhile, Bloomberg said the offer could bolster the company’s balance sheet.
It was Peloton’s first public stock sale since its IPO in 2019. The offering price was US$29 per share at the time. According to Bloomberg, Goldman Sachs and JPMorgan Chase & Co., the lead managers of the initial public offering, also have underwritten the new deal.
Peloton’s first quarter FY22 highlights
Peloton’s Connected Fitness subscriptions grew 87% YoY to 2.49 million, and paid digital subscriptions rose 74% YoY to 887,000.
In addition, its total members grew to over 6.2 million in the quarter.
The New York-based company’s total revenue grew 6% YoY to US$805.2 million in Q1. The gross margin was 32.6%. Also, Peloton’s net Loss was US$(376.0) million, or US$(1.25) per diluted share in the quarter. The adjusted EBITDA was US$(233.7) million.
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Source: Pixabay
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Q2 and full-year FY22 Guidance
Peloton expects its Connected Fitness subscriptions to be in the range of 2.8 million to 2.85 million.
The total revenue to be between US$1.1 billion and US$1.2 billion, with a gross profit margin of around 24%.
In fiscal 2022, it expects the Connected Fitness subscriptions in the range of 3.35 million to 3.45 million. The total revenue to be between US$4.4 billion and US$4.8 billion, with a gross profit margin of around 32%.
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Bottomline
On Tuesday, Peloton reiterated that the company is adequately “capitalized.” The company will further expand its liquidity position to implement its best strategic decisions for medium and long-term growth, Peloton said in a statement on Tuesday. However, investors should evaluate the stocks companies before investing in stocks.
