Getting Back in Shape: Peloton’s Turnaround Strategy Includes Minority Stake Offer

Glory Days Gone?

During the pandemic, Peloton Interactive (PTON) was flying high. As people abandoned gyms and sought out ways to keep fit at home, many found a solution in the company’s bikes and streaming classes.

As people have emerged from their pandemic hibernation, Peloton has seen erosion of its customer base as gyms regained favor. The fitness company has seen its valuation shrivel from $50 billion in early 2021 to under $6 billion in Q2 2022. The company is looking for ways to enact a turnaround and stabilize financially.

Turnaround Strategies

In early 2022, Barry McCarthy, who hails from Spotify (SPOT) and Netflix (NFLX), replaced Peloton co-founder John Foley as CEO. At the same time the company announced plans to cut 2,800 jobs and to nix a $400 million spend to build a factory in Ohio.

McCarthy also wants to move away from an emphasis on equipment sales and focus on subscription-based models, similar to those used at Spotify and Netflix. To support these initiatives and gain favor with investors, the company is also seeking outside capital.

Seeks Minority Investor

The company is offering investors a 15 to 20% minority stake, the capital from which could help it to execute its turnaround ambitions.

Earlier this year, when Foley was still CEO, activist investor Blackwells Capital called for the company to be sold. Amazon (AMZN) has reportedly considered purchasing the whole company outright. Now, Peloton is looking for a financial partner who can both provide a financial infusion and rebuild its credibility with investors. Meanwhile, the broader tech sector’s sell-off is not helping the situation. Peloton seems to have a couple flat tires, with the question being whether McCarthy can assemble the toolkit needed to fix things.

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