What Happened:

Shares of exercise equipment company Peloton (NASDAQ:PTON) jumped 20.9% in the afternoon session after reports that private equity firms are considering a buyout of the company. According to sources, there are discussions about cutting Peloton's operating expenses to make a potential acquisition more attractive. On May 2, 2024, Peloton announced cost optimization initiatives to reduce annual run-rate expenses by more than $200m by the end of FY'25. The plan includes reducing its global headcount by approximately 15% (400 Peloton team members). Following the news, Barry McCarthy stepped down from his roles as CEO, President and Board Director, providing more of an opening for potential buyers as the board continues to search for his replacement.

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What is the market telling us:

Peloton's shares are very volatile and over the last year have had 65 moves greater than 5%. But moves this big are very rare even for Peloton and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 5 days ago, when the stock dropped 14.5% on the news that the company reported first-quarter results. The big news here isn't related to the quarter's financials. Peloton announced that CEO Barry McCarthy (formerly of Netflix and Spotify) will be stepping down just over two years after he took over from founder John Foley. The company also announced a restructuring program to cut costs, and this will include laying off 15% of its workforce or roughly 400 employees. With regards to the numbers, they weren't good. EPS missed and its operating margin fell short of Wall Street's estimates. The company lowered full year revenue guidance. Overall, the results could have been better.

Peloton is down 29.1% since the beginning of the year, and at $4.14 per share it is trading 57.7% below its 52-week high of $9.78 from July 2023. Investors who bought $1,000 worth of Peloton's shares at the IPO in September 2019 would now be looking at an investment worth $160.13.

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