Peloton Sees Interest For Potential Buyout From Private Equity, Stock Soars

Zinger Key Points
  • Peloton shares rise: Private equity eyes buyout amid company's restructuring efforts.
  • CEO transition and layoffs: Peloton announces new interim co-CEOs and 15% workforce reduction.

Peloton Interactive Inc. PTON shares are trading higher following a report suggesting that private equity firms are considering a potential buyout of the company.

The update comes amid Peloton’s business turnaround plans after 13 straight quarters of losses, CNBC reports.

The company had discussed plans to go private with at least one firm as multiple private equity firms flocked around to pitch an attractive deal by exploring ways to slash its operating expenses.

Last week, the connected fitness company reported worse-than-expected third-quarter results, a CEO transition, and a 15% global workforce reduction.

The pandemic darling’s sales of $717.7 million were down by 4.2% year over year, missing the analysts’ estimates of $723.2 million. The EPS loss of $(0.45) missed the analyst consensus estimate loss of $(0.36). 

The company also informed about CEO Barry McCarthy’s departure and Karen Boone and Chris Bruzzo’s arrival as interim co-CEOs, while it found a permanent replacement

Peloton also divulged a restructuring program involving slashing its global headcount by roughly 400 employees. Peloton also cut its full-year revenue outlook.

Peloton has emerged as a potential acquisition target, with its market capitalization dropping dramatically from $49.3 billion in January 2021 to around $1.3 billion by Monday. 

While Peloton boasts a profitable and stable subscription service with millions of dedicated users, the high production costs and numerous recalls of its essential products—bikes, and treadmills—have tarnished its reputation and incurred significant financial losses.

Additionally, the demand for expensive at-home exercise equipment has declined as consumers across all income levels cut back on major expenditures. 

Over the past two years, Peloton has experienced a decline in hardware sales and struggled with high operational costs, which have challenged its growth, cash flow generation, and profitability.

Peloton held $1.7 billion in debt as of March 31, 2024.

Peloton stock plunged 52% in the last 12 months. Investors can gain exposure to the stock via BNY Mellon Innovators ETF BKIV and IShares Virtual Work And Life Multisector ETF IWFH.

Price Action: PTON shares are up 12.8% at $3.99 at the last check Tuesday.

Photo Courtesy: Koshiro K On

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