According to sources familiar with the matter, several private equity firms are considering a buyout of Peloton as the connected fitness company aims to refinance its debt and regain momentum following 13 consecutive quarters of losses.
In recent months, Peloton, a darling of the pandemic era, has engaged in discussions with at least one firm regarding the possibility of going private.
However, the level of interest from this firm remains unclear. Several other private equity firms have shown interest in acquiring Peloton, although it’s uncertain if formal discussions have taken place.
Private equity firms are looking into strategies to reduce Peloton’s operating expenses to enhance the attractiveness of a buyout.
Peloton recently showed a comprehensive restructuring plan expected to slash annual expenses by over $200 million by the end of fiscal 2025. Peloton’s stock surged more than 18% in premarket trading and closed over 15% higher.
While there’s no assurance of a deal, Peloton may choose to remain a public company. The sources requested anonymity due to the confidential nature of the discussions.
A spokesperson for Peloton declined to comment, stating, “We do not comment on speculation or rumors.”
Peloton’s market capitalization has plummeted from its peak of $49.3 billion in January 2021 to approximately $1.3 billion as of Monday.
Despite maintaining a consistent and profitable subscription business with millions of devoted users, Peloton has faced challenges due to the high costs associated with its equipment. Recalls of its bikes and treadmills have led to brand erosion and significant financial losses.
Moreover, as consumer spending on high-ticket items declines across income groups, demand for expensive at-home exercise equipment like Peloton’s has waned.
Over the past two years, Peloton has struggled to boost sales, generate free cash flow, and achieve profitability.
Last week, the company announced CEO Barry McCarthy’s departure alongside disappointing earnings results. Peloton also revealed plans to reduce its workforce by 15%, or around 400 employees, citing the need to align spending with revenue.
The restructuring efforts, primarily through layoffs, are expected to enable Peloton to achieve sustained free cash flow, making it more appealing to potential private equity buyers.
Peloton’s debt, totaling approximately $1.7 billion as of March 31, has also weighed on the company. It is working with JPMorgan and Goldman Sachs on a refinancing strategy to deleverage and extend maturities at a reasonable cost of capital.
Despite its challenges, sources close to the company are confident that Peloton will successfully refinance its debt.
