Exercise bike firm Peloton to float with potential value of $8bn
Peloton, a hi-tech exercise bike business that aims to be the Netflix of fitness, is set to float with a potential value of up to $8bn (£6.5bn) despite revealing hefty losses.
The New York-based firm, whose celebrity fans include David Beckham and Hugh Jackman, has filed documents that reveal a plan to raise $500m on the Nasdaq stock market, and losses that jumped to $195m from $48m a year before.
Peloton will be the latest of a string of loss-making tech “unicorns” to burst on to the market this year, including the ride-hailing apps Lyft and Uber, the scrapbook site Pinterest and the workplace messaging service Slack.
The company, founded in 2012 by John Foley, a former executive at the book chain Barnes & Noble, was valued at $4bn last summer after raising $550m from investors led by the private equity firm TCV, which has previously backed Netflix, Spotify and Facebook.
Peloton lets spin class fans work out in a gym or at home using a £2,000 bike or treadmill fitted with a screen on which subscribers can livestream or download classes. It launched in the UK and Canada last year and has confirmed plans to enter Germany this year.
Subscribers in the UK pay £39 a month for access to the online classes. The classes are filmed at the company’s Manhattan or London studios and spinners can interact with instructors and other Peloton members. An alternative £19.49-a-month digital-only service gives access to fitness classes including spin sessions without the equipment or interactive element.
“On the most basic level, Peloton sells happiness,” the company says in documents laying out its flotation plans.
Foley said: “Peloton is so much more than a bike – we believe we have the opportunity to create one of the most innovative global technology platforms of our time.”
The company says it has the potential to sell 14m bikes across the US, Canada and the UK and is attracting customers who would not previously have considered buying fitness equipment.
Documents filed by the company this week reveal that Peleton’s revenues more than doubled this year to $915m.
Carolina Milanesi, a tech analyst at Creative Strategies in San Francisco, said Peloton’s mix of a device with a social “eco-system” made it more resilient and attractive to investors than tech companies that relied solely on a piece of hardware. “Hardware is the part that others can copy or follow or even make better but the eco-system and software and fanbase is not something that is easy to replicate,” she said.
She added that Peloton could be seen as more attractive than the likes of Uber, whose expansion is being limited by government legislation around the world, or Pinterest, whose users are largely female, and so is viewed as lacking broad appeal.
Investors, however, are likely to be concerned by Peleton’s losses, which have tripled in the past year. The company also has a limited trading history, having sold just 577,000 bikes and treadmills by June this year, the vast majority in the US. It has 511,202 paying subscribers out of more than 1m members who have signed up since launch.
This year the company was forced to stop using more than 1,000 songs by the likes of Drake, Lady Gaga, Katy Perry and Rihanna after 10 music publishers files a $150m copyright lawsuit.
David Minton, a director at the Leisure Database Company, a fitness market analyst, said Peloton stood out as it was a more professional operator than some previous bike makers. But he said a number of rival products were preparing to enter the market.
The established New Zealand fitness brand Les Mills has teamed up with the exercise bike maker Stages to offer a service similar to Peloton’s in UK gyms. Studio Sweat offers an app with a wide range of different virtual workouts including spinning, yoga and weight training, while Zwift offers virtual training rides that can be used with any exercise bike or road bike fitted to a trainer device that enables it to be cycled on the spot indoors.
Exercise bike makers are also upping their game. Technogym, an Italian gym equipment firm, has announced a bike with a internet-connected screen.