Peloton Sells $ 1.07 Billion Discounted Shares

Kari Gandhi rides a Peloton stationary bike at his home on April 6, 2020 in San Anselmo, California.

Ezra Shaw | Getty Images

Peloton shares surged on Tuesday even after the company announced it plans to raise $ 1.07 billion in a new share offering, which prices its shares at a discount to its current trading price.

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

In an announcement on Tuesday, the connected fitness equipment maker said the proceeds will be used for general corporate purposes, including building or expanding facilities, acquiring and investing in new products and technologies.

The decision to raise the money came when Peloton sees a slowdown in sales of its products. Public companies often place shares to take advantage of the rising share price, but Peloton’s market value has plummeted this year. Its share price has declined by about 66% since the beginning of the year.

Peloton shares were initially down 7% in premarket Tuesday on the news, but have recently surged more than 8%. The stock closed down 3.5% on Monday to hit $ 47.49, slightly above its public offering, after hitting a 52-week low of $ 46.70 on the same day.

Simeon Siegel, an analyst at BMO Capital Markets, told clients that he saw no end to Peloton’s loss of cash, and expressed concern over the sudden withdrawal of fundraising plans by management.

“You have to ask if the forecast downgrade shortly after its introduction and capital raising soon after it was unnecessary, is not a trend, and not a one-off occurrence,” Siegel said in an interview.

When the company reported higher-than-expected losses in its fiscal first quarter earlier this month, it also cut its full-year revenue forecast by as much as $ 1 billion.

Peloton invests in marketing, new product launches and strengthening its supply chain. However, as consumers choose to exercise at home, analysts and investors fear that this investment may not be timely. He also temporarily froze hiring to try to cut costs.

Peloton expects the share placement to close on Thursday. Peloton said that affiliates Durable Capital Partners and TCV, as well as accounts presented by T. Rowe Price Associate, have expressed interest in buying the stock.

The company plans to provide offer underwriters with a 30-day share option for up to $ 150 million, or about 3.3 million Class A shares, at a public offering price less discounts and commissions.

Find the complete Peloton press release here

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