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Peloton $1B Stock Offering Seen Removing Overhang

Posted November 18, 2021
Jessica de Sa-Mota
The Fly

This will be the first time Peloton will sell shares since the company’s IPO back in 2019.

Shares of Peloton (PTON) are on the rise on Tuesday after the fitness-equipment maker announced a $1B stock offering. Less than two weeks ago, the company had said it saw “no need for any additional capital raise based on our current outlook.” Following the news, Baird analyst Jonathan Komp added Peloton as a new “Fresh Pick,” arguing that the company’s announcement of the capital raise removes “a significant near-term overhang.”


Peloton Interactive has confirmed the pricing of an underwritten public offering of 23,913,043 shares of its stock at a public offering price of $46 per share. All of the shares are being offered by Peloton. The offering is expected to close on November 18. The net proceeds of the offering, after deducting underwriting discounts, and commissions and other offering expenses payable by Peloton, are expected to be approximately $1.07B. Peloton intends to use the net proceeds from the offering for “general corporate purposes, which over time may include working capital, capital expenditures, including for the construction or expansion of facilities, and investments in and acquisitions of other companies, products, or technologies that Peloton may identify in the future.” Goldman Sachs and J.P. Morgan are acting as joint bookrunning managers and representatives for the underwriters in the offering. Citigroup, BofA Securities and Barclays are acting as co-managers in the offering.


Baird analyst Jonathan Komp is adding Peloton as a new “Fresh Pick,” arguing that the company’s announcement of a $1.07B common stock capital raise removes “a significant near-term overhang” that he believes has pressured sentiment since the company’s fiscal first quarter earnings call. The analyst is seeing an opportunity for a tactical bottom and still thinks about $50 per share could represent a floor, while noting short interest is “high” and that he sees an improving catalyst path over several upcoming quarters. Among the potential catalysts Komp sees a seasonal demand pickup, which would strengthen confidence in 2022 guidance and post-COVID industry demand; signs that supply chain pressures/inflation may be easing; and additional detail on Peloton’s path back to better unit economics. The analyst has an Outperform rating and $90 price target on Peloton shares.


Also commenting on the news, BMO Capital analyst Simeon Siegel noted that Peloton is “backpedaling again” as the company commenced a $1B stock offering despite recently stating that it saw no “need for any additional capital raise.” The analyst increasingly believes COVID-19 may prove negative for Peloton given his view that management projected heightened future pandemic-demand, invested heavily to satisfy past demand, and helped raise competitor profiles, and expects “pressure ahead.” Siegel has an Underperform rating and $45 price target on Peloton shares, but noted that his target does not reflect downside from dilution and potentially ensuing multiple compression.


Earlier this month, Peloton reported first quarter losses per share of ($1.25) and revenue $805.2M, both worse than the expected ($1.07) and $810.73M, respectively. The company also said that first quarter ending Connected Fitness Subscriptions grew 87% to 2.49M and paid Digital Subscriptions grew 74% to 887,000. Total Members grew to over 6.2M. For fiscal year 2022, Peloton said it saw revenue between $4.4B-$4.8B, adjusted EBITDA of ($475M)-($425M), gross profit margin of approximately 32%, and 3.35M-3.45M ending Connected Fitness Subscriptions. For the second quarter, the company said it saw revenue between $1.1B-$1.2B, adjusted EBITDA of ($350M)-($325M), gross profit margin of approximately 24%, and 2.8M-2.85M ending Connected Fitness Subscriptions.


In Tuesday afternoon trading, shares of Peloton jumped almost 13% to $53.61.

Originally Posted on November 16, 2021 – Peloton $1B Stock Offering Seen Removing Overhang

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