Peloton’s CEO says pandemic darling ‘thinly’ capitalized after bigger loss

Peloton Interactive Inc reported a bigger third-quarter net loss on Tuesday as expenses doubled and demand for its fitness equipment cratered from pandemic highs, leading to warn the company was “thinly” capitalized.

The company’s shares tumbled about 25% to $10.6 in trading before the bell and were set for a record low opening, if current losses hold.

“The balance sheet challenge has been managing inventory,” Chief Executive Officer Barry McCarthy said in a letter to shareholders.

“We finished the quarter with $879 million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale.”

The company said it had signed an agreement with JP Morgan and Goldman Sachs (NYSE:GS) to borrow $750 million in 5-year term debt.

Like many stay-at-home winners, the fitness equipment maker is grappling with plummeting demand. The company’s market value has tumbled to $4.69 billion from nearly $50 billion during the pandemic when its bikes and on-demand fitness content were lapped up.

The company said connected fitness subscribers for the fourth quarter will be about 2.98 million, compared to FactSet estimates of 3.01 million.

Revenue fell to $964.3 million in the third quarter from $1.26 billion a year earlier.

Peloton (NASDAQ:PTON), in February, replaced its chief executive officer and has unveiled measures like price cuts for its equipment while focusing on its subscription plans to transform the company.

Net loss attributable to Class A and Class B shareholders widened to $757.1 million, or $2.27 per share, in the quarter ended March 31, from $8.6 million, or 3 cents per share, a year earlier.