Key Takeaways
- Shares in fitness company Peloton jumped after CNBC reported private equity firms were exploring a buyout.
- Peloton announced last week that CEO Barry McCarthy would be leaving the firm as it planned to cut 15% of its staff.
- The company is looking to cut operating expenses by up to $200 million as it has failed to turn a profit since 2020.
Shares in Peloton (PTON) kicked into a high gear Tuesday after news reports that a number of private equity firms may be considering a buyout.
At least one firm has held talks with the company about plans to take it private, CNBC reported.
What Has Peloton In a Spin?
After the pandemic-era boom, Peloton has struggled to remain relevant. And that is weighing on the company’s financial health as earnings skid and costs pedal higher.
Peloton shares slumped to an all-time low last week after reporting worse-than-expected third-quarter earnings for is fiscal 2024 and announcing the exit of CEO Barry McCarthy.
McCarthy took over the company in February 2022 from co-founder John Foley after the company struggled to hold onto a COVID-19 sales boom. McCarthy will be replaced by current Chair Karen Boone but will remain as a “strategic advisor” to the company, which has failed to turn a profit in its last three fiscal years. Peloton’s fiscal year ends on June 30.
Company is Restructuring
The fitness company has also announced a restructuring plan, including eliminating 15% of its staff, in a bid to cut its operating expenses back by up to $200 million by the end of fiscal year 2025.
Restructuring savings at the firm will be largely driven by layoffs, alongside marketing, research and development, IT, and software cuts. Executives said that the company will be able to generate free cash flow without the need for immediate sales growth.
Peloton stock was up 14% at $4.03 at around 1:00 p.m. ET, but was down roughly 50% over the last 12 months.