Private equity firms are actively exploring the possibility of acquiring Peloton, the connected fitness giant, in a bid to assist the company in reviving its fortunes following a tumultuous period marked by financial losses. Sources familiar with the matter revealed to CNBC that Peloton, amidst its 13 consecutive quarters of losses, is contemplating a move towards privatization to facilitate a strategic turnaround.
In recent months, discussions have ensued between Peloton and at least one private equity firm regarding a potential buyout, although the level of commitment from the firm remains undisclosed. Concurrently, several other private equity entities have expressed interest in Peloton as a prospective acquisition target, although formal negotiations have not been confirmed.
Central to the deliberations are strategies to streamline Peloton’s operational expenditures, thereby enhancing the appeal of a potential buyout. Notably, Peloton unveiled an extensive restructuring initiative aimed at reducing annual operating expenses by over $200 million by the conclusion of fiscal year 2025.
The market responded emphatically to CNBC’s report, with Peloton’s premarket shares surging by more than 18%, ultimately closing more than 15% higher. However, despite the market’s positive reaction, the outcome of the talks remains uncertain, and Peloton may ultimately opt to retain its status as a publicly traded entity. Sources privy to the discussions emphasized the confidentiality of the negotiations.
When approached for comment, a Peloton spokesperson refrained from offering insights, citing the company’s policy against speculation and rumors.
Peloton’s trajectory as a takeover target stems from a significant decline in its market capitalization, plummeting from a peak of $49.3 billion in January 2021 to approximately $1.3 billion as of the latest available data. While the company boasts a robust and profitable subscription-based business with a substantial user base, challenges persist primarily stemming from the costly production of its signature equipment.
Moreover, Peloton’s hardware segment has been marred by recurring recalls, denting consumer confidence and eroding brand loyalty. The ongoing economic uncertainty has further dampened demand for high-ticket items such as at-home exercise equipment, exacerbating Peloton’s struggles to stimulate sales and achieve profitability.
Recent corporate developments, including the departure of CEO Barry McCarthy and a disappointing earnings report, underscore the urgency for Peloton to implement decisive measures. The company’s workforce reduction by 15%, alongside targeted cost-cutting initiatives, aims to align expenditures with revenue and bolster long-term financial sustainability.
Debt obligations pose an additional burden for Peloton, with liabilities amounting to approximately $1.7 billion as of March 31. To address this challenge, Peloton is actively engaging with its lenders, including JPMorgan and Goldman Sachs, to devise a refinancing strategy aimed at deleveraging and extending debt maturities. Despite the multifaceted challenges confronting Peloton, sources close to the company express confidence in its ability to navigate the refinancing process successfully. With a concerted focus on restructuring and strategic partnerships, Peloton endeavors to chart a course towards renewed growth and stability in the evolving fitness landscape.
