Connected fitness company Peloton priced its IPO last night, raising $1.16 billion with shares priced at $29 a piece. That price didn't hold for too long, with the company closing its day out at $25.76.
According to Bloomberg, this makes Peloton the third-worst US trading debut in 10 years for companies that have raised at least $1 billion prior to their IPO.
The dip may partly be tied to Peloton itself but also its association with other big IPOs like Uber and the recently-delayed WeWork, all of which have in common that their companies are not yet profitable, nor do they seem particularly close to profitability. Investors seem to be waivering on their support of unprofitable IPOs, which are at their highest rate since the dot com bubble according to a report this week by Bloomberg.
To make matters worse, Peloton itself may have overstated its revenue growth according to CBS News, who reported today that "much of Peloton's growth is fueled by zero-interest loans and aggressive financial assumptions that don't make clear to would-be investors the risks and potential losses to Peloton if those loans go bad."
WHY IT MATTERS
Industry insiders are watching Peloton not just for a big IPO, but for a stock that can hold its value. After all, the last big IPO in the connected fitness category, Fitbit, had a huge, historic opening that quickly dropped off, and the company has struggled with its stock prices more or less ever since.
WHAT'S THE TREND
Peloton is a hard company to judge, and it has a lot of supporters, not to mention satisfied customers. It seems to have more substance to it than some other high-profile IPOs, but only time will tell if it has the makings of a robust, sustainable business. We dove into some of those questions a month ago when the company's S-1 dropped.
Peloton is trading on the NASDAQ with the stock symbol PTON.