One IPO sure to get investors sweating is New-York based Peloton’s (ticker: PTON), and not just because the company specialises in exercise and fitness.
The firm, which is looking to raise $1.2bn on the Nasdaq with pricey shares of $26 to $29, is currently being sued by the National Music Publishers Association for using copyrighted music in its streamed workout videos.
However, this is a firm with a huge cult following, so being sued for hundreds of millions may not be off-putting for some keen investors looking for a company that is growing at an extraordinary pace.
The exercise start-up, which launched in 2012, saw its sales grow by a massive 110% to nearly $1bn for the year ending 30 June 2019 – up from $435m in 2018. However, people looking to invest in the young company need to have a stomach for risk, as the firm also had net losses of $245.7m – a big increase from its $47.9m net losses the previous year.
Nevertheless, Peloton is a popular brand, with Men’s Health magazine calling its stationary exercise bikes “the best cardio machine on the planet”. Its USP is making luxury cycles and treadmills with screens so consumers can join live and recorded fitness classes from the comfort of their homes.
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It also charges a premium for its products – hence the impressive sales figures. Its bikes retail for around $2,000, while its treadmills sell for double at around $4,000.
In addition, it also sells membership to its online classes, set at $39 per month. To date, it has just over 100,000 digital subscribers who can log in and participate in the latest exercise crazes including yoga, meditation, and bootcamp sessions.
With a valuation of about $8bn, the firm appears to be relying on its rapid growth to hook investors in. In its IPO documents the firm said it plans to expand its international operations, although it warned this will result in new costs. Its ambitious expansion plans include a number of new stores in Canada and the UK.
However, the fitness industry is highly competitive, and Peloton faces stiff competition from other fitness clubs and exercise equipment manufacturers, such as Icon Health & Fitness, Echelon Smart Bike Connect, and Planet Fitness.
Planet Fitness, which launched on the New York Stock Exchange in 2015 at $16 per share, has seen its stock steadily rise to around $62.
But with the fitness industry being susceptible to fads, there have been some IPO failings. SoulCycle ditched its IPO plans last May, citing “market conditions” for its decision to back out.
So with the exercise sector prone to suffer more ups and downs than a treadmill, investors should weigh up Peloton’s IPO – although its growth potential is undoubtedly appealing.
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