CNBC has learned that Tonal, the connected fitness equipment maker that counts tennis superstar Serena Williams and Amazon as backers, is cutting a third of its workforce.
Aly Orady, the company's chief executive officer, said in an interview that the company employs 750 people today, compared with a little more than 100 before the Covid-19 pandemic.
The company is looking at an initial public offering. He said that Tonal has been unprofitable in the past. The job cuts will allow the company to make money quickly.
Consumers were stuck at home and looking for ways to break a sweat, which led to rampant growth at Tonal. NBA stars such as James and Williams appeared in the commercials for Tonal. At one point, it was valued at as much as $1.6 billion.
The brakes are being tapped for now. A number of businesses are reducing head count in order to trim expenses and adjust to new levels of consumer demand for their products. Even if a recession isn't certain, businesses are grappling with red-hot inflation on everything from raw materials to fuel to workers' salaries.
"As we head into a recession, it's important that we become a business that's here for the long term." We are going from a hypergrowth business to a sustained growth business.
The company didn't say how much money would be saved through the layoffs. It didn't say if its valuation has been adjusted.
Hypergrowth is no longer rewarded in the public markets. Private market investors are no longer investing as much as they used to. The dollars are not the same as they were a year ago.
Money-losing entities are becoming less attractive to investors. There are some publicly traded companies that fit this bill.
The shares of Peloton hit an all-time low of $8.66 on Wednesday, having lost 70% of their value in the first half of the year. A year earlier, the company had a loss of $8.6 million in the three-month period.
The stock price of Allbirds has plummeted since it went public last year. The shares of the eyeglasses retailer are down more than 70% this year.
Orady said that Tonal will be scaling back on advertising in order to cut costs. Overall demand has remained steady despite the fact that sales have slowed in the last 90 days.
The company increased the price of its equipment by $500.
A minimum of eight weeks of continued pay will be given to all of Tonal's employees who are affected by the job cuts.
There is an extension on the window of time that option holders have to exercise their stock options for up to four years.
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