Peloton is burning through cash and borrowing like crazy to stay

Peloton (PTON) said it had just $879 million in cash in the bank at the end of the quarter, which has left it “thinly capitalized,” CEO Barry McCarthy said. That forced the company to borrow a significant amount of money from Wall Street to keep its operations running.

To combat that, McCarthy cut the prices of its treadmills and bikes. That prompted daily sales to increase 69%, McCarthy said. He also plans to sell Peloton products to third-party retailers for the first time ever.

“Turnarounds are hard work,” McCarthy bluntly told investors in a shareholder letter. “It’s intellectually challenging, emotionally draining, physically exhausting, and all consuming. It’s a full-contact sport.”

But the company’s comeback — if there is one to be had — is slower than Wall Street would like. Peloton added just 195,000 new subscribers last quarter, less than half what it was adding a year ago. And the company said it would post sales of about $700 million this quarter, way below what investors had expected.

Peloton shares slid as much as 19% in premarket trading. The stock is down about 90% from when it hit its all time high in late 2020.

To stay afloat, McCarthy said Peloton is borrowing $750 million in five-year term debt from JPMorgan and Goldman Sachs, two banks that helped underwrite its IPO.

“I want to thank everyone involved for their hard work in completing this important financing and look forward to reporting on our progress in reshaping Peloton’s business in the quarters ahead,” McCarthy said.