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Peloton IPO: Shares tumble on first day of trading

Emily McCormick

Peloton (PTON) disappointed in its public debut Thursday, as investor interest in the digital fitness company sputtered during its first day trading on the Nasdaq.

The stock opened at $27 per share, or 6.9% below where it priced late Wednesday. Shares extended losses during the session, closing lower by 11.17% to $25.76 apiece.

Shares of Peloton, a company selling indoor exercise equipment and digital workout subscriptions, had drifted lower during early indications Thursday morning after pricing at the top end of expectations. Peloton had raised $1.16 billion in selling 40 million class A shares at $29 apiece late Wednesday, giving the company an initial valuation of $8.1 billion.

But Wednesday’s early price action – which saw shares indicate an open of as low as $24 per share – underscored investor jitters about high-priced unicorns. Peloton, like its newly public and highly valued tech peers, hit the public markets touting high growth potential— but leaving a trail of red ink.

Shares of Uber (UBER) and Lyft (LYFT), other money-losing “unicorn” companies that had been valued at more than $1 billion in private markets, currently trade below their IPO pricing.

Peloton has run at a loss since inception in 2012, and posted a net loss of $195.6 million for the year ending in June, more than quadrupling that of the year prior. But despite the recent yawning losses, the company is expected to be profitable by 2023, Peloton CEO John Foley said during an interview with CNBC Thursday morning.

Peloton hit the public markets Thursday. (Courtesy of Peloton)
Peloton hit the public markets Thursday. (Courtesy of Peloton)

Top-line growth, however, has also been robust. Revenue during the most recent fiscal year grew 110% to $915 million, rising at an even faster pace than the 99% increase from the year prior.

And the company believes the opportunity for further growth remains ripe: Peloton pegs its total addressable market at 67 million households, including 45 million in the U.S.

That’s even with the premium price tag for Peloton’s fitness equipment: Its flagship stationary bicycle costs more than $2,000, while its newly launched treadmill costs roughly $4,000. Customers then pay another $39 per month for streamed fitness classes.

So far, Peloton has amassed 511,000 connected fitness subscribers since launch, as of the fiscal year ending in June. The company reported its most recent churn rate was just 0.65% per month. Total workouts have risen at a quicker pace than net subscriber additions, underscoring a loyal user base.

Goldman Sachs (GS) and J.P.Morgan Securities (JPM) served as lead underwriters for Peloton’s IPO.

Mark your calendars!
Mark your calendars!

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

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