Peloton Is Offering Up $1B in Shares. What Does That Mean for PTON Stock Holders?

As Covid-19 cases continue to decline across the United States, some of the breakout stocks that defined the earlier stages of the pandemic are losing momentum. A good example of this is at-home fitness play Peloton Interactive (NASDAQ:PTON). The company’s luxury bikes and treadmills skyrocketed in popularity while people were forced to stay indoors — despite their hefty price tags. Now though, PTON stock is cooling off, and some recent news has left investors with plenty of questions.

Peloton (PTON stock) sign on city storefront

Source: JHVEPhoto /

What’s Happening With PTON Stock

During the company’s earnings call, JPMorgan analyst Douglas Till Anmuth raised the question of how much cash Peloton was comfortable continuing operations with following the year’s losses. CFO Jill Woodworth responded that the company saw no need to raise any additional capital beyond its current outlook, giving the impression that investors should have no concerns regarding PTON stock.

That was two weeks ago. Today, news broke that Peloton was planning on offering $1 billion in Class A common shares. As Wall Street scratches its head in attempt to understand why, it’s difficult to ignore the negative picture that this paints for Peloton.

Although the news hasn’t kept shares from climbing 5% in the first hour of trading, PTON stock hasn’t been enjoying November so far. Shares plunged on Nov. 4 when the company reported disappointing revenue growth and since then, they haven’t recovered. PTON is in the red by 42% for the past month and 48% for the past six months.

This is not a great trend as it heads into a new year.

Why It Matters

What we’re seeing from Peloton is poor management strategy that will end up costing the company. Unless something drastic happened between today and the earnings call, Woodworth seems to have provided misleading information. At the very least, that will shake investors’ confidence in the company.

The company is at a pivotal time in general. With gyms reopening, the need for at-home fitness equipment is decreasing. Peloton’s products are some of their industry’s most expensive, thereby lending them a niche market. As its market shrinks, Peloton is going to have to figure out how to adapt to a changing market or risk falling behind.

What It Means

At times like this, leadership is crucial for a publicly traded company, particularly one coming off of a bull run that made it a winning stock. This move from Peloton’s leadership is going to send investors looking elsewhere for places to put their money.

In the short term though, it seems the bad news is priced in. For PTON stock holders, keep a close eye on the company. How the company and its leadership navigate the quarters ahead will be critical in a reopening world.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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