Is Apple about to buy Peloton?

Rumours have been circulating for a while, but is Apple set to make a purchase of the once glittering star of the fitness industry? 

Considered one of the best indoor training platforms for use alongside an exercise bike, Peloton has apparently been in secret conversations since May 2022, when it was first reported that Peloton Interactive Inc. was looking to sell a 20% stake in the business.

According to an opinion piece in Sports Pro Media by Rohn Malhotra, co-founder and managing director of sports data and insight company SportsTechX, Peloton's situation has "culminated in talks of a cut-price sale to the likes of Amazon or Apple or some other deep-pocketed giant lower in the alphabet."

With the owners of the Peloton indoor training bike announcing increased Apple Watch functionality across its devices throughout this year, a move towards Apple as a preferred buyer does seem a possibility. 

Peloton Interactive Inc. has been coming under fire from shareholders, including Blackwell Capital, which manages investment funds in the business, and which has stated that in the "two months since Peloton hired one of the highest paid CEOs in all of corporate America [Barry McCarthy], nothing had fundamentally changed."

With over 6.2 million members worldwide, Peloton was once the hottest name in the world of online interactive fitness.

But the rising star of the pandemic, which saw its shares gain 440% in 2020, began its nosedive in 2021, and is suffering huge losses from a peak share value of $171 per share to, as of today, just $9.70. That's resulted in a drop from an estimated market value of between $45 to $50 billion, to today's market cap at just $3.3billion.

Originally the company took drastic cost-cutting measures, temporarily halting production, and ousting the co-founder John Foley in February of this year, although he still remains executive chair and is part of the super voting group.

Malhotra says that any corporation investing in Peloton would still be buying a "solid core product" and that "most importantly, the overall sentiment of the connected fitness market is extremely healthy."

This comes after a report by The Business Research Company market research report on online and virtual fitness market size estimated it could rise to as much as $79 billion by 2026.

As talks are still commercial and in confidence, there is no word from Apple or Amazon regarding investment, but there will be increasing pressure to find new investors with the most recent Peloton 3Q FY2022 Shareholder letter from Peloton's CEO stating that the brand is currently "thinly capitalized for a business of our scale" requiring a $750 million loan from JP Morgan and Goldman Sachs with a five-year term debt.

With several other Peloton alternatives for indoor cycling, the market is a highly competitive place; the brand's position is not helped by June's monthly US subscriber increase from $39 to $44, which is likely to return a decrease in members. Price increases in other territories are less clear. 

It's worth noting, however, that as the brand writes down its hardware, the cost of a Peloton bike has fallen from between $1,495/£1,345 - $2,495/£2,295 to $1,195/£1,345 - $1,995/£1,845 depending on the model.

The rumours of a tech giant investment also come after a recent Peloton Interactive Inc. Investor presentation made suggestions that the brand is looking to bolster its position as a software company with the sale of the Peloton Output Park, the brand's factory, which was only announced in May last year. And, in relation to management team changes, that: "Other talent additions [are] expected in the coming months, particularly as we shift our focus from being hardware to software-centric."