Peloton Files for IPO with $8 Billion Valuation Amid Rapid Growth and Mounting Losses

On August 30, 2019, VCBeat (WeChat ID: vcbeat) learned from foreign media reports that internet fitness company Peloton released its IPO prospectus on Tuesday, revealing a grim financial situation. The company incurred a loss of nearly $200 million in fiscal year 2019, four times the loss of the previous year. The prospectus also disclosed multiple legal disputes involving the company’s infringement of music copyrights and patent rights.

However, according to Fortune magazine, investors still believe the company’s valuation could reach as high as $8 billion. As Peloton’s initial public offering (IPO) date approaches, everyone is pondering one question: Is the company merely a passing fad, or does it have a sustainable business model?

Despite the highly optimistic environment for digital health IPOs, there are reasons to remain cautious about internet fitness IPOs. The most recent large-scale IPO in this category was that of wearable device company Fitbit; although its first-day trading volume was substantial after going public, its stock price has since declined to varying degrees.

In the discussion about whether Peloton can truly create value, one question pertains to the uniqueness of its products. As a manufacturer of fitness bikes, Peloton is neither novel nor competitive. The same holds true for the virtual fitness classes it offers. The company’s IPO prospectus is filled with colorful language, describing Peloton as an innovative company that integrates fitness, technology, and media. This sounds exciting, but it fails to genuinely answer: What sets this company apart?

Peloton claims that 80% of its customers purchase its products through channels outside the traditional fitness equipment market. Peloton aims to demonstrate that its true value lies in bringing a gym-like fitness experience into the home, leveraging internet technology to bridge the gap between home fitness equipment and gyms in terms of workout motivation and user experience.

“We believe that consumers will increasingly spend on experiences, as they seek meaningful community connections,” the company wrote in its prospectus. “Boutique fitness is the fastest-growing segment of the physical fitness industry. According to data from the International Health, Racquet & Sportsclub Association (IHRSA), 40% of health club members identified themselves as boutique fitness studio members in 2017, with membership in boutique fitness studios growing by approximately 121% from 2013 to 2017.”

In other words, Peloton’s product is not merely an exercise bike—it is an exercise bike bundled with a live cycling class. Much like Fitbit, Peloton leverages social pressure and network effects to drive engagement, and it is this combination of product offering and workout motivation that constitutes its true selling point.

 Most people believe that,Pelotonand its selling price exceeds2000Dollar Bikes Are a Luxury for the Rich.GreatistCEODerek FlanzraichInTwitterexpressed their views: althoughPelotonDespite its poor financial condition, the company maintains high levels of employee engagement and retention. This is in contrast toFitbitpresents an interesting contrast.FitbitThe biggest problem is employee turnover.Pelotonwith an annual income of5households with an annual income of USD 10,000 or more, this is a6700potential market of tens of thousands of households (to date, the company has sold57.7ten thousand units, including bicycles and treadmills).

Another key issue of concern is:PelotonWhether it is worth consideringOneNumbersHealthCompany? U.S. Consumer News and Business Channel (CNBC）ofReporterChristina FarrIt is believed that,Pelotonhas not improved the health status in the United States,Because the company's target population is notNot the most in need of fitnessAuxiliaryassisted population.

This view has been validated by the previous generation of fitness apps and wearable devices, although these apps and wearables are generally less expensive than Peloton’s exercise bikes.

To be fair, Peloton did not claim in its prospectus to address the public health crisis. Instead, it framed the health benefits of its platform as “helping our members achieve their goals.”

Fitbit is gradually expanding from the fitness sector into healthcare. This week, Fitbit launched its new premium subscription service, Fitbit Premium, which features “guided health and fitness programs focused on nutrition, sleep, relaxation, and physical activity,” developed in collaboration with physicians.

As a product with built-in media channels, Peloton may also move in this direction in the future. However, for now, it remains merely a fitness brand helping upper-middle-class households achieve their personal fitness goals.

(Compiled by Tian Shuhang)