Peloton Interactive, a New York City-based maker of internet-connected fitness bikes, is expected to launch an eagerly awaited initial public offering in 2018, according to two sources briefed on the matter.
Bankers have been pitching the firm to underwrite the process, the sources said. JP Morgan is viewed as a lead contender, they said, since it served as the sole placement agent for Peloton’s Series E financing round of USD 325m in May. Other bulge-bracket banks are also pitching their services, they said.
Since it has not picked a banking syndicate yet, one of the sources said the IPO is more likely to occur in the second half of 2018 than in the first half, although it could be pushed into the following year if market conditions aren’t favorable.
CEO John Foley told this news service in January 2016 that Peloton planned to launch an IPO within two years.
Six months later the company hired Lisa Klinger as its CFO, citing her experience leading luxury retailer Vince [NYSE:VNCE] and US grocer Fresh Market to IPOs. Klinger has been more coy about Peloton’s exit, telling The Financial Times in June 2016 that an IPO is the “leading” scenario before telling Bloomberg TV “it’s anybody’s guess” when it occurs.
A sale to a private equity firm or a strategic buyer is also a possible exit, Klinger told The Financial Times.
Since it was founded in 2012, Peloton has raised approximately USD 445m from Catterton, Tiger Global Management, Wellington Management, Fidelity Investments, Kleiner Perkins, True Ventures, Comcast, NBCUniversal, GGV Capital, Balyasny, QuestMark and scores of high net worth investors.
This year’s capital raise valued Peloton at USD 1.25bn. The company generated USD 170m in revenues in 2016, and, at a ReCode conference in September, Foley said Peloton is projecting that figure to more than double in 2017.
Customers who buy its USD 1,995 exercise bikes also pay USD 39 each month to livestream spinning and fitness classes on an attached tablet. In the 2016 interview with this news service, Foley emphasized how Peloton’s business model includes a subscription component that is similar to Netflix [NASDAQ:NFLX].
That business model is highly disruptive, and going to market sooner rather than later would allow the company to secure as rich a valuation as possible, the second source said.
Monthly subscription fees generate about 20% of the company’s total revenues, the first source said.
In a 2016 interview with this news service, Foley also listed vertically integrated global consumer product companies such as Tesla Motors [NASDAQ:TSLA], GoPro [NASDAQ:GPRO] and Apple [NASDAQ:AAPL] as potential public comps.
This year Peloton broadened its content offerings by streaming yoga classes. It also has been opening up more retail outlets across the country where customers can try out and purchase its indoor interactive bikes.
Peloton also recently partnered with Marriot-owned [NASDAQ:MAR] Westin Hotels & Resorts, which is providing the bikes in select guest rooms and fitness studios at a few dozen properties across the US.
Gunderson Dettmer provides legal advice for Peloton.
by Troy Hooper in San Francisco and Tom Cane in New York