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Peloton prices IPO at $29 per share, at high end of expected range

Peloton priced its initial public offering at $29 per share, the company said in a press release late Wednesday, making it the latest startup valued over $1 billion to tap the public markets.

Peloton, an indoor exercise equipment company offering digital workout subscriptions, is set to have class A shares begin trading on the Nasdaq under the ticker “PTON” during market hours Thursday. The company also has class B common shares, which offer 20 votes apiece, held by executives and early investors.

The pricing lies at the high end of the expected $26 to $29 per share range the company had been targeting. Peloton sold 40 million Class A shares, raising $1.16 billion in the offering and giving the company a valuation north of $8 billion.

Peloton has raised $994 million in venture capital funding, and was last valued in private markets at $4.15 billion in August 2018, according to Pitchbook. That makes it a “unicorn” — putting it in the same category as Uber and Lyft when they first went public. Just like those companies, Peloton has yet to turn a profit.

Goldman Sachs (GS) and J.P.Morgan Securities (JPM) are serving as lead underwriters for the IPO.

Public prospects

Founded in 2012, the New York-based company has since amassed more than 511,000 “connected fitness subscribers” tuning in for Peloton’s streamed workout classes.

Peloton’s exercise equipment sells for around $2,000 for its flagship stationary bicycle, and $4,000 for its newer treadmill — with subscribers then shelling out an additional $39 per month for classes. During fiscal year 2019, the company cited a customer acquisition cost of just $5 per connected fitness subscriber.

But while the equipment comes at a premium price tag for consumers, those sales haven’t yet translated into profits for Peloton.

Peloton priced its IPO Wednesday evening. Shares are set to begin trading Thursday on the Nasdaq under the ticker "PTON."

The company has run at a loss since inception, and posted a net loss of $195.6 million for the year ending in June, more than quadrupling that of the year prior.

But top-line growth has also been robust, with revenue more than doubling to $915 million during the period.

Peloton’s margins have also been pressured, with some analysts suggesting there’s more of that in store as the company launches more live-studio content, and ramps up its apparel business.

The red ink puts Peloton in the company of other highly valued tech companies that hit the public markets this year, including Uber (UBER), Lyft (LYFT) and Slack (WORK).

These companies have so far seen their stock prices punished by investors demanding clearer near-term paths to profitability: Uber and Lyft shares each trade below their IPO pricing. And at around $22 apiece, Slack’s shares trade well below their opening trade price of $38.50 from the company’s April direct listing.

The timing of Peloton’s IPO also comes just following a debacle for WeWork’s parent company as it sought its own public listing, with the office-leasing company’s high-flying private market valuation coming under scrutiny ahead of its listing. The company has since at least temporarily shelved the offering and replaced its CEO Adam Neumann with two newly elevated executives.

But external factors aside, other questions have also arisen around Peloton’s public prospects. The company said in its S-1 it believes its total addressable market is 67 million households, including 45 million in the U.S. — a figure that some analysts have called overly ambitious given the high price point for the products and services.

The company is also grappling with ongoing legal battles over music licensing in its workout videos.

Mark your calendars!

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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