By Alex EuleUpdated Sept. 26, 2019 7:11 pm ET / Original Sept. 26, 2019 12:02 pm ET
Peloton Interactive , long a cult favorite among its customers, got a chilly reaction from investors on the company’s first day in the public market.
Shares closed down 11.2% Thursday to $25.76, suggesting the Peloton’s IPO price might have been too aggressive for the first wave of public investors. The company set an IPO price of $29 last night.
The stock had opened trading at $27 a share, giving Peloton (ticker: PTON) a total market value of $7.7 billion, based on 286 million shares outstanding. (The company offered 40 million shares in the IPO with an option for the underwriter to purchase an additional six million shares.) It raised about $1.3 billion in the offering.
Peloton, which was founded in 2012, was valued last year in the private market at $4.15 billion, according to data from PitchBook.
The company sells stationary bikes and treadmills with internet-connected tablets that stream live and on-demand classes. The company counts 511,000 “connected fitness subscribers” using these products as of June 30.
Peloton sells its bike for $2,245 and its treadmill for $4,295. A monthly subscription that provides the streaming content costs $39. Peloton also sells a $19.49 monthly subscription that allows customers to stream classes to their own fitness devices via smartphones, tablets, and web browsers.
The company reported revenue of $915 million in its most recent fiscal year, ended June 30, with a loss of $195.6 million. Revenue jumped 110% from the prior year, while the loss grew from $47.8 million.
In an interview Thursday, Peloton Chief Financial Officer Jill Woodworth says a shift in investor sentiment likely had an impact on the company’s debut.
“Like everyone, we’ve been watching some of the market—the IPO market specifically,” she tells Barron’s. “The overall macro market started to deteriorate over the last couple of weeks or so. And certainly you see that when you talk to investors on the road.”
But, Woodworth adds: “We are so excited about the capital that we raised. And that we’re going to be able to make all the wonderful investments that we believe will continue to drive long-term value: more products, more geographies, more software. So we’re just excited to have it behind us.”
Highly valued startup WeWork delayed its own IPO as Peloton was talking to investors about its offering. But Woodworth didn’t point to that as a specific reason for the shift in sentiment.
“I think there’s just a healthy skepticism in the market right now overall,” she says. “I obviously wish we were going out at a time where the market sentiment was better. But we feel very good about not only our existing shareholders—many of which came into the IPO—but we also were able to attract some very high quality new long term shareholders…So all in all I’m feeling pretty happy.”
The company’s IPO paperwork included a long list of bullet points to describe the company, but it kicks off the description with this line: “We are a technology company that meshes the physical and digital worlds to create a completely new, immersive, and connected fitness experience.”
Barron’s first wrote about Peloton in 2014, highlighting founder and CEO John Foley’s plans to use distributed technology to disrupt the fitness industry.
This story has been updated with comments from Peloton’s CFO and to reflect the closing price of the stock on its first day of trading.