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Peloton nets $1.07 billion after offering 23.9 million shares at $46 each

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Cari Gundee rides her Peloton exercise bike at her home on April 06, 2020 in San Anselmo, California.

Ezra Shaw | Getty Images

Peloton shares were rising Tuesday even after the company announced it was planning to raise $1.07 billion through a new stock offering that values its shares at a discount to its current trading price.

Notably, the offering of 23.9 million shares at $46 each comes just a few weeks after Peloton said it had no reason to raise additional funds.

In its announcement Tuesday, the connected fitness equipment maker said the proceeds would be used for general corporate purposes, including the construction or expansion of facilities, acquisitions and investments in new products and technologies.

The decision to raise money comes as Peloton is seeing slowing momentum for its products. 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 share price is down about 66% year to date.

Peloton shares initially fell 7% in premarket trading Tuesday on the news, but were recently up more than 8%. The stock had closed Monday down 3.5% at $47.49 — slightly above the public offering price — after touching a 52-week low of $46.70 earlier in the day.

BMO Capital Markets analyst Simeon Siegel told clients that he doesn’t see an end in sight for Peloton’s cash burn, and he also raised concerns about management’s sudden reversal over plans to raise cash.

“You have to ask if lowering guidance shortly after introducing it, and raising capital shortly after it wasn’t necessary begins to appear a trend rather than a one-off,” Siegel said in an interview.

When the company reported a wider-than-expected loss in its fiscal first quarter earlier this month, it also slashed its outlook for revenue for the year by as much as $1 billion.

Peloton has poured money into marketing, launching new products and bolstering its supply chain. As consumers cool on at-home fitness, however, analysts and investors worry those investments might have been ill-timed. It has also put a temporary freeze on hiring to try to reel in expenses.

Peloton expects the stock offering to close on Thursday. Affiliates of Durable Capital Partners and TCV, and accounts advised by T. Rowe Price Associate have expressed an interest in purchasing shares, Peloton said.

The company is planning to grant the offering’s underwriters a 30-day option to purchase up to another $150 million in stock, or about 3.3 million Class A shares, at the public offering price, less discounts and commissions.

Find the full press release from Peloton here.

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