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Illustration: Sarah Grillo/Axios

Peloton CEO John Foley told Axios on Thursday that he isn't too concerned about how the connected fitness company's share price has fallen sharply in its first day of post-IPO trading.

"I'm following it like everyone else, but trying not to take it too personally or getting too discouraged after a couple hours of sideways trading. Obviously, we'd rather have it going the other way, but I don't think it's a reflection on our fundamentals or the excitement of investors who came in. This is a long journey."
  • Peloton raised nearly $1.2 billion in its IPO, pricing at the top of its $26–$29 per share range. That gave it an initial market cap of $8.1 billion and a fully diluted market value of $9.6 billion.
  • Shares opened below the IPO price, and they have fallen steadily. As of this writing, they are down more than 11% to $25.58 per share.

Foley spoke with Axios several hours after the first trades, and he acknowledged that his company priced into an IPO market roiled by WeWork's troubles.

About the road-show reaction: "It was binary: People got it and loved it or they did not get it and were scratching their heads and asking super cynical questions about fitness being a fad. In the last couple meetings, I asked people to raise hands if they thought fitness was a fad. No one really did. That's because while there are faddish things in fitness, fitness itself isn't going away and we're going at core cardio, cycling, strength, etc."

Cheaper rivals: "I'm not worried about it. There will be a flight to quality ... and we have a lot of money on the balance sheet."

What if bike-buyers default on financing plans? "We don't hold the paper. Affirm takes all of the risk on financing, and they believe it's less than 1% default exposure. We get the money in advance and pay Affirm a fee — kind of a contra revenue concept. Ernst & Young encouraged us to think about it as a discount."

Margins: "We make reasonable money on the bike now. Say it used to cost us $1 to make, now we make it for less than 60 cents thanks to recognizing real scale on the supply chain. In fact, we make enough margin on the hardware between bikes and treads to pay all sales and marketing investment, dollar-for-dollar."

Then why unprofitable? "Our U.S. bike business is profitable. We're investing $100 million in 2 new studios and $100 million into a new headquarters in New York City. But we don't move into any of those for another 6–12 months, so we're double-burdened by real estate right now. We're also on investment mode on the tread, are hiring German instructors to launch in that country, and are investing in other growth vectors. Basically, we juiced our expense line but think it will pay dividends down the line."

Go deeper

Thousands without power as "hazardous" winter storm lashes East Coast

Winter view from Charlotte as winter storm Izzy creates dangerous conditions in Charlotte, N.C. on Jan. 16. Photo: Peter Zay/Anadolu Agency via Getty Images

A major winter storm was lashing much of the East Coast on Sunday, causing widespread power outages and disrupting travel over the holiday weekend.

The big picture: Heavy snow and ice accumulations were "likely to produce hazardous travel," downed trees and more outages from the Mid-South to the Northeast, per the National Weather Service. Some parts of the U.S. can expect to see up to a foot of snow through Monday.

Updated 6 hours ago - Science

Volcanic eruption in Tonga caused "significant" damage

This satellite image of the eruption on Jan. 15 taken by Himawari-8, a Japanese weather satellite operated by Japan Meteorological Agency and released by National Institute of Information and Communications Technology (NICT). Photo: NICT via AP

Significant damage has been reported in Tonga following an undersea volcanic eruption on Saturday, which covered the Pacific nation in ash and cut off communication lines.

Driving the news: The eruption triggered tsunami warnings across Tonga's islands and in other regions, including the West Coast of the U.S. and New Zealand, which were later lifted.

6 hours ago - World

North Korea launches 4th suspected missile test this month

A news broadcast in Seoul, South Korea, of an apparent North Korean missile test on Monday morning local time. Photo: Jung Yeon-je/AFP via Getty Images

North Korea's military fired "two suspected short-range ballistic missiles" eastward from Pyongyang on Monday morning local time, per South Korean and Japanese officials.

Why it matters: The fourth such launch since Jan. 5 comes days after North Korea's military warned of "stronger" action if the U.S. moved to have more sanctions imposed on the country.