Is Peloton’s Crash Today A Warning For Connected Fitness Startups? – Crunchbase News

Peloton mentioned Tuesday that CEO John Foley will step down and the corporate will slash 2,800 jobs after seeing demand for its product wane.

Peloton rapidly emerged as a “pandemic winner”—an organization that skilled the monetary upside of the COVID-19 pandemic and its related stay-at-home orders. With gyms closed and other people seeking to train at dwelling, Peloton noticed demand for its product—and its inventory value—skyrocket at first of the pandemic.

But the corporate has confronted hurdles in latest months. CNBC reported last month that Peloton is pausing manufacturing on its bike after demand slowed down. With extra individuals vaccinated and returning to gyms, fewer customers are prepared to shell out roughly $2,000 for the corporate’s high-end stationary bikes.

With its inventory value down, Peloton is chopping prices, together with scrapping plans for a manufacturing facility in Ohio. 

Potential acquirers together with Amazon and Nike have reportedly expressed curiosity within the firm. Activist investor Blackwells Capital LLC referred to as for Peloton to fireplace its CEO and look into promoting the corporate, The Wall Street Journal reported on Tuesday. 

“While Foley has supermajority B shares and in the end controls the destiny of Peloton, we consider shareholder strain will construct to solicit bids and promote Peloton to a strategic participant with potential bidders Apple, Amazon, and Nike possible within the fold,” Dan Ives of Wedbush Securities mentioned in a analysis word to buyers.

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In 2021, VC-backed firms within the health area raised practically $5.9 billion in funding, up from round $2.4 billion in 2020, in line with Crunchbase knowledge. In different phrases, buyers wager huge on the class after 2020 proved that customers would spend on health firms reasonably than or along with gyms. Dieting app Noom led the pack with a $540 million funding spherical, and connected-fitness firms together with Tonal and Tempo additionally raised nine-figure rounds.

But whether or not connected-fitness startups can preserve their momentum in 2022 stays to be seen.

All in all, Peloton’s points may very well be simply company-specific. The important situation is how briskly Peloton grew, in line with Helaine Knapp, CEO of health startup CityRow, a connected-fitness firm for rowing.

At-home health isn’t going anyplace, as gym-goers need a mixture of at-home and in-person experiences, she mentioned in an e-mail. 

In truth, CityRow has seen its machine gross sales, digital class enrollment and in-person attendance spike as individuals have returned to gyms, in line with Knapp.

Illustration: Dom Guzman