Sep 26, 2019

Peloton raises more than $1 billion in IPO

Illustration: Sarah Grillo/Axios

Peloton Interactive last night raised $1.16 billion in its IPO, giving it an initial market cap of around $8.1 billion.

Why it matters: It's a much-needed IPO win for both New York's tech startup market and lead banker J.P. Morgan, both of which were reeling from WeWork's spontaneous combustion.

Details: Peloton priced 40 million shares at $29, which was the high end of its range. Existing investor Technology Crossover Ventures plugged in another $100 million, via a concurrent placement. It will begin trading later this morning on the Nasdaq under ticker PTON.

  • Renaissance Capital reports that the $9.6 billion fully-diluted initial valuation is the highest such mark ever for a New York-based startup IPO.

ROI: The company had raised nearly $1 billion in VC funding, most recently at a $4.15 billion post-money valuation. Major backers include TCV, Tiger Global, Fidelity, True Ventures, and L Catterton.

  • Fidelity and Tiger Global also needed a returns reprieve. Fidelity has big stakes in both Juul and WeWork, while Tiger Global backed Juul.

Yes, there are doubters. Not just because of the faddish nature of fitness, but also because Peloton has grown exclusively in a growing economy. People may still work out during a recession, but lower-cost options are abundant. Plus, Peloton doesn't seem to have accounted for the possibility of widespread defaults on hardware financing plans. Expect some stubborn shorts.

I'm pretty bullish, probably because I own a Peloton and am a satisfied customer. Plus, Apple doesn't seem interested in playing in connected fitness hardware/software/media, even though that seems to be its sweet spot.

  • That said, Peloton missed an opportunity to offer IPO shares to users. It's a company that emphasizes "community" — its Facebook page engagement, for example, is insane — and owning a few shares could have engendered a sense of ownership for the purpose of further protecting against churn (at least on the outermost margins).
  • A "peloton" is a group of cyclists riding together.

The bottom line: Public market investors bought high into an unprofitable, VC-backed, tech company that pioneered a new category. Uber and WeWork aren't unicorns of the apocalypse. They're exceptions that prove the persistent rule.

Go deeper: Dissecting the customer acquisition costs of the latest unicorn IPOs

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Balance sheets and profits seem to matter to investors again

Illustration: Aïda Amer/Axios

The mood has shifted and balance sheets and profits seem to matter to equity investors again, as the recent debuts of large, money-losing companies have been punished by the market.

Driving the news: Shares of smart stationary bike company Peloton opened down 7% and closed 11% below their $29 IPO price to mark the third-worst performance for an IPO that raised more than $1 billion since the financial crisis, Bloomberg data showed.

Go deeperArrowSep 27, 2019

Peloton CEO John Foley on post-IPO falling stock price

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."
Go deeperArrowSep 26, 2019

The IPO story gets complicated

Illustration: Aïda Amer/Axios

Public market investors have become less willing to leave their comfort zones, and it's manifesting most obviously in the IPO market.

The big picture: Novel disruption has fallen out of favor, with many preferring more time-tested models like enterprise SaaS and biotech.

Go deeperArrowSep 27, 2019