Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Peloton: How Steep Is the Descent from the Peak?

TMT Weekly:  3 Things that Stood Out (In Retail) The Week of 5/​15/​2020

Peloton IPO (Part 2): Pedalling Furiously to Go Nowhere

Peloton Interactive IPO Valuation Analysis

Peloton IPO (PART 1): Will They Only Kill the Gym?

Equity Capital Markets

Peloton Interactive  / Equity Capital Markets

We believe there is a good, upcoming shorting opportunity for the Peloton Interactive IPO. <a href="https://www.smartkarma.com/entities/peloton-interactive-inc" target="_blank" data-smartkarma-citation="entities:28014:1" rel="noopener">On Wednesday, Peloton Interactive (PTON US)</a> priced its IPO at $29 per share, which was at at the high end of the IPO price range of $26 to $29 per share. We believe that a good shorting opportunity would be if the stock price rises about 10% to 15% above the IPO price of $29 or at about $32 to $33 per share.We believe that the overall risk-reward of investing in the Peloton Interactive is poor in the mid-to-high end of the IPO valuation sensitivity analysis which would be in the $27 to $33 per share. Especially at the higher end of the valuation sensitivity range of $32 to $33 per share, we believe the potential investment returns are very poor and there are further downside risks at these levels. The key negative points of Peloton include the increasing competitive threat of lower-priced health equipment and monthly fees, big lawsuits from music publishers and artists of nearly $300 million, and the fact that the company has yet to face a serious recession and there are many signs that a potential recession could be coming in the next two to three years. Nearly 98% of the company's customers live in the U.S. Peloton is still not well known in other places in the world including in Asia and Europe and we believe the company's business model is also likely to be less scalable in other overseas markets such as Asia and Europe, mainly because of the fewer number of consumers that would be willing to spend $2,000 to $4,000 to purchase these exercise equipment.

We believe there is a good, upcoming shorting opportunity for the Peloton Interactive IPO. On Wednesday, Peloton Interactive (PTON US) priced its IPO at $29 per share, which was at at the high end of the IPO price range of $26 to $29 per share. We believe that a good shorting opportunity would be if the stock price rises about 10% to 15% above the IPO price of $29 or at about $32 to $33 per share.We believe that the overall risk-reward of investing in the Peloton Interactive is poor in the mid-to-high end of the IPO valuation sensitivity analysis which would be in the $27 to $33 per share. Especially at the higher end of the valuation sensitivity range of $32 to $33 per share, we believe the potential investment returns are very poor and there are further downside risks at these levels. The key negative points of Peloton include the increasing competitive threat of lower-priced health equipment and monthly fees, big lawsuits from music publishers and artists of nearly $300 million, and the fact that the company has yet to face a serious recession and there are many signs that a potential recession could be coming in the next two to three years. Nearly 98% of the company's customers live in the U.S. Peloton is still not well known in other places in the world including in Asia and Europe and we believe the company's business model is also likely to be less scalable in other overseas markets such as Asia and Europe, mainly because of the fewer number of consumers that would be willing to spend $2,000 to $4,000 to purchase these exercise equipment.

Peloton Interactive

Shorting Peloton IPO - At What Levels?