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Is Peloton Racing to its IPO?

Written by Monica Savaglia
Posted March 5, 2019

We’re now three months into the new year. You might be the type of person who sets New Year’s resolutions... and that’s perfectly okay! One of the biggest and most popular New Year’s resolutions is to join a gym and get back into shape, or at least start living a healthier lifestyle.

I wouldn’t say getting healthier and back into shape is a resolution of mine. It’s more that I know I’ve been hibernating most of fall and winter, and I know that warmer weather is ahead and I’ll need to be in shape when I want to do outdoor activities like hiking or biking.

Well, as we approach spring and hopefully an end to this bone-chilling weather, I’ve been preparing myself by taking cycle classes at my gym. It’s been a low-impact and easy way to get back into shape. Since I started taking those cycling classes at my gym, I started to notice more advertisements for a line of indoor bicycles from the company Peloton Interactive, Inc. I first started noticing them around the holiday season.

The commercials sparked something inside me, especially during the holiday season, when I knew the time to get back in shape was very near. I even thought to myself, “Wow, these Peloton bikes seem very useful and worthy of the $2,245 base price tag.” However, realistically, I have nowhere to put an exercise bike in my apartment.

But that’s not the case for some people. I mean, think about it for a second: You could spend $60–$100 on a gym membership each month — and that’s just using the equipment the gym has to offer — or you could invest $2,000+ in an indoor bike, store it in your home, and have the opportunity to exercise whenever you feel like it. So, if you have the space in your home, then maybe an indoor exercise bike is the way to go.

Peloton Pedals Toward its Market Debut

Peloton was founded in 2012, and it sells exercise bikes and treadmills with tablets attached that stream live fitness classes. As I mentioned earlier, the cheapest bike package retails for $2,245. Then every month, users pay $39 for the live stream of classes.

The company has studios in New York, which is where those live classes are streamed. The company sells a digital subscription service for $19.49 a month for streams of yoga meditation and bootcamp classes.

Peloton’s cofounder and chief executive, John Foley, said, “We stream 24 hours of live television content around the world every day. We have 10,000 classes on demand. It’s a media company akin to a Netflix.”

In 2017, the company earned more than $400 million in sales, which was a 135% increase from 2016. It’s expected to earn at least $700 million in sales in 2019.

This successful and still fairly young startup has been interviewing banks for its initial public offering (IPO). Peloton has revenue growth, so we could assume that its subscribers to its monthly services are also growing.

Could Peloton’s Valuation Get to $8 Billion with an IPO?

Venture capitalists have invested at least $500 million into Peloton already. Last year during a funding round, it was estimated that Peloton had a valuation of $4.15 billion.

In a recent interview, CEO John Foley mentioned that he believes 2019 will be the year Peloton IPOs. This is the reason the company has been interviewing with banks, taking those first steps toward a public offering by hiring banks to be underwriters for its IPO.

Peloton has hired Goldman Sachs and J.P. Morgan to lead its IPO. Both of these banks have put an $8 billion valuation on the company. The company has a lot of growth opportunity and also the chance to bring in consistent revenue even if sales on its equipment see a lull.

People are subscribing monthly to Peloton’s live streaming sessions. A monthly subscription is a great way to earn revenue. Generally, the subscription will be set to auto-bill, so even if a person doesn’t watch those live sessions, that money is still leaving their bank account each month. Selling its hardware (bikes and treadmills) and subscription content is what’s going to generate a lot of revenue for Peloton. It isn’t dependent on one aspect of business, but instead has two outlets for potential income.

An IPO in the latter half of 2019 could be a more realistic IPO date for Peloton. The company has been taking the fitness world by storm. Late last year, data showed that Peloton had more customers in its fourth quarter than its competitor SoulCycle. This upward trend for Peloton is only going to push it forward on the market and become an even more desirable investment to potential investors.

Of course, we won’t get the clear view of what we’re really working with in terms of Peloton’s financials until we have access to its S-1 filing.

To stay updated on Peloton’s IPO, click here.

Until next time,

Monica Savaglia

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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