Peloton stock rises on $1bn offering

Fitness firm bounces back after poor first quarter

Peloton Interactive stock jumped on Tuesday after the company announced its intention to sell 23.9 million shares at $46 per share. 

However the announcement triggered an initial plunge of more than 7% in pre-market trading. 

The dip can largely be attributed to the conflicting nature of Peloton’s messaging. Only two weeks ago, the company’s chief financial officer Jill Woodworth said on a call with analysts: “We don’t see the need for any additional capital raise based on our current outlook.”

However, by mid-morning on Tuesday, the US exercise equipment and software firm said it had successfully completed just such a capital raise, with Goldman Sachs, Citigroup Global Markets, BofA Securities, J.P.Morgan and Barclays Capital constituting the primary buyers of class A shares. 

The company said the raised funds will be used for general corporate purposes "which may include working capital, CAPEX, construction or expansion of facilities, investments, and acquisitions."

First-quarter earnings

The volte-face could be said to have been triggered by the substantial sell-off that Peloton suffered in the wake of its recent first-quarter earnings

Having benefited from the rise in exercising from home during the Covid-19 crisis, the firm struggled to adjust to a post-lockdown world. It was also hit by safety fears after the death of a child and had to issue a product recall.

Peloton reported a net loss of $376m, or $1.25 per share, in the three months to 30 September, having posted net income of $69.3m, or 20 cents per share, a year earlier. Although revenue grew by 6% year on year to $805.2m, it missed the $810.7m expected by analysts. 

Adding further alarm, Peloton’s free cash burn rose to $684m. With only $924m of cash and securities at the end of the quarter and the company denying the need for further capital investment, investor sentiment soured. 

Peloton stock price fell 40% in the first week of November. 

By 12:00 (EDT), the company traded up by 12% at $53.58, 63.5% below its 2021 starting level.

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