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Peloton Stock Leaps After Pricing $1 Billion Share Sale at $46

Less than two weeks after saying it saw "no need" for additional capital following a surprise third quarter loss, Peloton now plans to sell $1 billion in new shares.

Peloton Interactive  (PTON) - Get Peloton Interactive, Inc. Class A Report shares traded higher Tuesday after the fitness equipment-maker unveiled plans to sell $1 billion worth of shares less than two weeks after saying it had not plans to raise new capital. 

Goldman Sachs and JPMorgan will lead the share sale offering, Peloton said, with a target sale of $1 billion and an option to sell an additional $150 million. Peloton priced the 23.9 million shares at $46 each, 

  • 11:10 AM Eastern Time: Peloton prices $1 billion share sale at $46, stock surges 11.8%

The move follows a $9.2 billion wipeout in Peloton shares following weaker-than-expected third quarter earnings published on November 5.

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Peloton posted a net loss of $376 million for its fiscal first quarter, which ended in September, amid the slowest sales growth in more than a year and said 2022 revenues would likely come in between $4.4 billion and $4.8 billion, a $1 billion reduction from its prior forecast.

Adding to its demand woes, Peloton said the $400 price cut to its signature bike, rising freight costs and supply chain disruptions -- alongside costs linked to its treadmill recall -- would squeeze profit margins for the remainder of its fiscal year.

"Just cutting to the chase, we don't see the need for any additional capital raise based on our current outlook," CFO Jill Woodworth told investors on a conference call following the third quarter earnings release. "As we mentioned, we're taking significant steps to adjust our expenses across COGS and opex with this revised revenue guidance, then we have a lot of levers to pull. In addition, what we're also going to do is reevaluate the cadence of some of the capital investments that we're making."

Peloton shares were marked 11.35% higher in mid-morning trading Tuesday to change hands at $53.03 each. 

"We increasingly believe COVID-19 may prove negative for Peloton, as management projected heightened future pandemic-demand, investing heavily in future capacity to satisfy past demand, dwindling their own cash, while helping raise competitor profiles (& coffers)," said BMO Capital Markets analyst Simeon Siegel. "Expect pressure ahead. Our ($5 price target) does not reflect downside from dilution and potentially ensuing multiple compression from a further management mis-signal."