Peloton Seeks Minority Investment to Shore Up Business

Peloton Interactive Inc.

PTON -9.09%

is exploring a sale of a sizable minority stake, in an effort to shore up its business as the once-hot bike maker’s stock continues to sink.

The fitness company is targeting potential investors including industry players and private-equity firms that could take a stake of around 15% to 20%, according to people familiar with the matter. Discussions are at an early stage and there are no guarantees the New York-based company will find a taker or agree to a deal.

New capital could bolster Peloton as it attempts a major turnaround. It could also serve as a vote of confidence if it comes from an established private-equity firm or technology giant such as Amazon.com Inc.,

which is among the suitors that have explored a full purchase of Peloton, The Wall Street Journal earlier reported.

Peloton enjoyed high times as a pandemic darling, with homebound customers ordering its exercise equipment and streaming its virtual classes. Its valuation soared. But the company’s fortunes sagged as lockdowns eased and gyms started to fill up again.

Peloton’s value has fallen from a high of around $ 50 billion early last year to around 6 5.6 billion this week. The shares lost around 9% Thursday amid a broader market routines.

Peloton has been on a wild ride, announcing its CEO was stepping down and thousands of jobs would be cut, despite seeing a surge in sales early in the pandemic. Here’s why Peloton became a viral success, and why it’s spinning out now. Photo illustration: Jacob Reynolds

The company in early February replaced its chief executive and unveiled plans to cut 2,800 jobs in a bid to boost its valuation, which at the time was around $ 8 billion. But its shares have continued falling since then amid a slump in technology stocks that hasn’t spared even highly profitable companies like Facebook parent Meta Platforms Inc.

Peloton co-founder John Foley, who led the company for its 10-year existence, was successful as CEO by Barry McCarthy, the former chief financial officer of Spotify Technology SA

and Netflix Inc.

The company also said at the time that it was canceling plans for a $ 400 million factory in Ohio, lowering its full fiscal-year guidance and making changes to its board.

The changes came a few weeks after an activist investor Blackwells Capital LLC had called on Peloton to fire Mr. Foley and explore a sale.

Mr. McCarthy has said he plans to cut costs and create a company more focused on a digital presence and less reliant on sales of exercise equipment. Subscription-based business models tend to generate higher valuations on Wall Street than manufacturers do, and Mr. McCarthy has said he thinks he can apply strategies that worked at Netflix and Spotify to Peloton.

Write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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