At the peak of the speculative bubble, Peloton and other popular names managed to place convertible bonds with a zero percent coupon and a completely absurd conversion option—at $239 per share, when the stock is currently trading at less than $8.
At the time, MarketScreener repeatedly warned against this new financial aberration, the most scandalous profiteer of which was undoubtedly Michael Saylor's speculative vehicle MicroStrategy, since renamed Strategy. See MicroStrategy Incorporated: History is repeating itself and MicroStrategy Incorporated: The good and bad sides of the trade.
Returning to Peloton, this shows how remarkably optimistic—or fanciful?—investors were at the time about the prospects of what remains a specialist in exercise bikes. Once the fad had passed, the narrative completely reversed within a few weeks, leaving gullible investors high and dry.
In the midst of restructuring, Peloton placed a new convertible last year, but this time on much more rational terms—a 5.5% coupon and a conversion option at $4.60. If they exercised it, the group's new creditors would thus gain control of nearly one-fifth of the group's capital.
The tide has therefore turned dramatically. Since its peak in 2021, when Peloton's revenue reached $4bn, sales have tumbled by a third, while the number of shares outstanding has also increased by a third.
Published last week, the latest quarterly results show a further decline in sales and subscriber numbers—both down 6%. The only positive news is that the group's financial situation appears to have stabilized, with operating accounts balanced and net debt reduced to a manageable level.
All that is missing now is a commercial blockbuster to justify a market capitalization that is still higher than revenue. There are no signs of this on the horizon at present.
