Peloton is facing a big test in its upcoming IPO.
The fitness equipment maker is due to go public this week, and is tasked with persuading investors that its business model and market opportunity are an appealing bet. Peloton is aiming to raise as much as $1.2 billion in its IPO, and plans to list shares on the Nasdaq under the ticker PTON.
In its S-1 filing, Peloton revealed a growing membership base as well as increasing net losses. Peloton sells high-end exercise equipment and workout subscriptions for at-home use, at a range of price points. Its home fitness equipment ranges from $2,000 to $4,000, and its workout plan subscriptions range from $20 to $40 per month.
Peloton has highlighted its subscriber base and engagement metrics, telling investors that its base of "connected subscribers," meaning they have a paid subscription, has increased to 511,202 from 245,667 in 2018. Its retention rate for core "connected fitness" services is 95%. Overall, Peloton's fiscal 2019 revenue was $915 million, representing growth of 110% over 2018. Its net losses also widened, with Peloton reporting a loss of $245.7 million compared to $47.9 million the prior year.
Peloton will go public at $29 per share, Reuters reported on Wednesday. That's at the top end of the $26 to $29 range that it initially set, and equates to a market cap of $8.3 billion. That's more than double the valuation its fetched in its last round of private fundraising in August 2018, when it was valued at $4 billion.
Since its S-1 filing was released, investors have been parsing out the positives and negatives in Peloton's business model, and the outlook for the stock.
Highly-valued firms that burn a lot of cash haven't fared so well in the current market environment (see: Uber (UBER) , Lyft (LYFT) and The We Company's troubled IPO), and connected, at-home fitness is also a new market category that hasn't yet been tested in the public markets.
Peloton plans to list its shares on Thursday, Sept. 26.
Save 57% During Our Fall Sale. Join Jim Cramer's Action Alerts PLUS investment club to become a smarter investor. Click here to sign up and save!