According to a report, Peloton is looking for a major company like Apple or Amazon to buy a stake of around 20 percent in its business in order to improve its fortunes.
According to sources who are familiar with the matter, Peloton is looking for a big-name corporation or private equity firm that could help to validate its business in a show of confidence with a significant investment. The company is in the early stages of contacting potential buyers.
After months of gloomy news about the state of the company, including the revelation that it had halted production of its bikes and treadmills, Apple was floated as a potential buyer.
In January, it emerged that Peloton was temporarily stopping production of its connected fitness products for up to six months due to a significant reduction in consumer demand, a pressing need to control costs, and amplified competitor activity. High customer acquisition costs translate to high product pricing. The company reduced the price of its entry-level bike by almost 20 percent at the end of last year in order to increase sales. The company planned to lay off 41 percent of its sales and marketing staff.
New delivery and setup fees of between $250 and $350 were not taken into account by the company in their fiscal forecasts. In addition, Peloton saw low email capture rates for its $495 strength training product, and has struggled to regain traction after heightened interest in its products during the 2020 lockdowns. There are signs that Peloton is losing market share.
The Information reported that the company is taking significant corrective actions to improve its profitability outlook and that it looks like it is about to be acquired by a bigger company.
If Peloton is to have a future, it would be better off as part of a bigger, more diversified company. Apple is an ideal candidate to take on that project. It has the Fitness+ subscription service for classes and it markets the Apple Watch as a device that can help with jogging and other exercise activities. It could close Peloton's stores and sell the equipment through its own stores. And hey, after today, Peloton's market capitalization is down to $7.9 billion. Cook could pay for that by dipping into the change jar in his kitchen.
The idea of Apple acquiring Peloton caught the attention of some market watchers, with the possibility being weighed up by The Motley Fool. Apple has no interest in buying a stake in the company.
It is highly unlikely that a company like Apple could acquire the entire business of Peloton, since the co- founder of the company is part of a group that controls the company with super-voting stock.
The main goal of the company is to get a single, significant investment from a well-known backer. The news that the company was seeking further investment caused the shares to fall further this week, despite the fact that receiving a major new supporter like Apple or Amazon could calm panicked investors. Over the past year, the stock has fallen around 80 percent.
Apple has its own fitness brand, Apple Fitness+, which may make it disinterested in any stake in Peloton. Neil Cybart highlighted how Apple Fitness+ is a threat to Peloton because it is considerably cheaper, costing up to $388.01 less annually for digital classes alone. Peloton is on track to be a Fitbit 2.0, a company unable to compete with the giants subsidizing health and fitness tracking as an ecosystems feature, according to Cybart.
All Rights Reserved © 2024
