Peloton stock plunges below IPO price for first time in nearly two years after report of production halt
Shares of Peloton Interactive Inc. were cratering Thursday after a report indicated that the company temporarily planned to halt production of its connected exercise equipment to help curb costs in a period of slowing demand.
Peloton’s stock were off nearly 19% in Thursday afternoon trading and hovering below the company’s initial-public-offering price for the first time since April 2020. The shares were halted four times during the session following the report from CNBC, which said that Peloton was cutting its forecast for demand and pausing production of several products.
The company made its public debut on the Nasdaq at $29 a share back in September of 2019, before the coronavirus crisis took hold in earnest. The shares closed as high as $167.42 on Jan. 13, 2021 but they recently changed hands at $25.81 in Thursday’s session.
The maker of home-exercise products was a big winner early in the pandemic as people increasingly turned to its bikes and treadmills for pandemic-safe workouts that could offer a similar vibe to live, in-person exercise classes. But the company miscalculated demand as the economy reopened and slashed its forecast during its most recent earnings report.
“It is clear that we underestimated the reopening impact on our company and the overall industry,” Chief Financial Officer Jill Woodworth said on the company’s last earnings call in early November.
The CNBC report noted that Peloton intended to halt production of its regular exercise bike for two months after the company already halted manufacturing of the more expensive Bike+ model in December. The company also plans to curb production of its Tread treadmill for six weeks, per the report, which added that Peloton doesn’t expect that it will produce any Tread+ products during the 2022 fiscal year.
Business Insider reported earlier this week that Peloton planned to make substantial layoffs within its sales and marketing teams. CNBC also reported that the company was working with consultants from McKinsey & Co. to evaluate the company’s expenses and to consider potential job cuts.
Peloton didn’t respond to MarketWatch’s request for comment on its production or staffing plans.
The reports come as Peloton executives recently said the company would add $250 and $350 in delivery and set-up costs to its original Bike and Tread, respectively. Peloton pegged the price increases to supply-chain costs.
While the sales of fancy exercise equipment are a key part of Peloton’s business model, the company also sells a membership that gives existing Peloton owners access to workouts and classes. The company has a separate membership offering for those who don’t use Peloton equipment.
Peloton’s stock has now lost more than 70% over the past three months, and it has plunged 84% since closing at its post-pandemic peak of $167.42 on Jan. 13, 2021. The company is set to report its quarterly results on Feb. 8.
