Several private equity firms are reportedly considering buying out the Nasdaq-listed Peloton Interactive, reports CNBC.
It comes a few days after, as ChannelNews reported, the exercise equipment major’s CEO Barry McCarthy stepped down as the shares of the company tanked to record lows. This year alone its share value fell more than 43 per cent.
The business which opened in Australia with a flashy showroom in Martin Place, Sydney, in 2021, has now seen its market cap tank from around A$75.01 billion in January 2021 to about A$1.98 billion as of the start of this week.
Their latest Q3 2024 financials showed a 21 per cent decline in paid subscriptions compared to 2023.
Sales fell to $744 million — a whopping 6 per cent decline from the year prior and 34 per cent less than two years ago.
Earlier this month, the company announced a new restructuring programme to reduce annual expenses by more than A$304 million.
As part of that plan, it will also reduce its retail showroom footprint and cut around 400 jobs.
Peloton had a dream run during the early days of the pandemic where sales of its exercise bikes soared as people ditched gyms and instead chose to exercise at home.
Now though, that isn’t the case with people visiting gyms once again and an overall cost-of-living crisis coupled with high interest rates putting pressure on the spend for exercise equipment that can cost thousands of dollars.
Whichever PE firm decides on acquiring Peloton, considering one of them does, will also have to work with the company’s debt.
Its debt amounted to around A$2.59 billion as of March 31. It owes A$1.05 billion on its term loan, which could mature as early as November 2025, and A$1.5 billion on its 0 per cent convertible senior notes, which are due in February 2026.
Peloton is working with its lenders at JPMorgan and Goldman Sachs on a “refinancing strategy.”
“The objective of the cost reductions is to align our cost structure with the current size of our business and position Peloton to generate sustained and meaningful positive free cash flow, which is a top priority for us”, the company said in a statement at the time of announcing its quarterly results.
Its outlook for the remainder of the year isn’t promising though. The company now predicts sales of U$2.68 billion to U$2.70 billion for the full year. It is also anticipating 2.96 million to 2.98 million connected fitness subscribers, lower than a previous forecast for as much as 3.01 million.
With cost-cutting procedures in place, and news of potential PE firms showing interest in buying Peloton, shares of the company have climbed nearly 30 per cent since the start of this month – it hovered around the U$4.1 mark on Tuesday.
CNBC noted that the anonymous sources that it spoke to regarding the interest in Peloton by multiple PE firms noted that there is no guarantee a deal will go through, and Peloton could well remain a public company.
