August 28, 2019 Tuesday brought another fascinating if slightly less bananas securities filing from another tech, or tech-ish, unicorn startup planning to go public. Peloton Interactive, valued privately at more than $4 billion, sells exercise bikes, mainly, and also subscriptions to exercise programs. Sales have been strong, doubling to $915 million in its most recent fiscal year, though its net loss quadrupled to $196 million.
Perhaps thinking a simple story would bring too simple a valuation from Wall Street, Peloton is following in the footsteps of Snap the camera company and WeWork the community company. In it’s S-1 filing, Peloton describes itself as an experience company. Oh, and also as a technology company, a media company, a logistics company, and a few more. To sum up, CEO John Foley, in a letter to investors, boils it down: “Peloton sells happiness.” There are many questions to be answered, such as what is the real cancelation rate of Peloton customers over time, but a fast-growing company with an obvious path to profitability going public at less than 10 times its sales doesn’t seem to be pedaling too fast to me. Stay tuned for more on Peloton.
The whole exercise (exercise, get it?) of analyzing trendy IPO candidates reminds me of a recent conversation I had with Mike Finley, the new CEO of Boingo Wireless. The company was early on the trend of helping travelers find Internet connections via premium Wi-Fi hot spots set up in convenient places like coffee shops and airports. It went public in May, 2011, under the stock symbol “WIFI,” but got off to a rocky start, falling below its IPO price of $13.50 per share almost immediately and then spending most of the next…checks notes, rechecks notes…six years underwater.
Turns out, there just weren’t that many people willing to pay that much money for Wi-Fi on the go when cellular service kept getting faster and faster. Prior CEO Dave Hagan realized that Boingo needed to pivot and moved resources away from the consumer market and towards telecom carriers that might want to piggyback their wireless phone customers on some of Boingo’s extensive indoor infrastructure in airports and so on. It seemed to be working , at least for a time, and Boingo’s long decrepit stock price (finally) climbed above the IPO mark and reached almost $36 a share by last fall.
Then the doors fell off again. Or should we say the signal grew weak? The business results remained steady, with revenue up 23% to $251 million for the year. But maybe investors didn’t like the acquisition of Elauwit Networks, a small Wi-Fi play, or the borrowing of more than $200 million via a convertible note due in just five years. Or maybe they had expected more. Revenue growth slipped from a couple of quarters at 22% to 18% to 14% in the first quarter. In February, Hagan retired and the board brought in Finley, a veteran of the telecom business from Qualcomm who also did stints at Sprint, Verizon, Airtouch Cellular, and Cellular One. Since then the stock has continued falling, breaching the old 2011 IPO price. At yesterday’s close, Boingo stood at $12.05, down 41% on the year.
Finley was talking up Boingo’s latest deal, a long-term arrangement with Verizon to provide 5G connectivity to Verizon customers at the almost 70 venues where Boingo already provides other wireless options. Still, almost no one has a 5G phone yet and 70 venues, even big ones like the Oculus at the World Trade Center in New York City, seem like a pittance in the context of the global wireless market. I joked that maybe it’s time to change the stock symbol, since Wi-Fi is no longer the main business. “We’ll keep the symbol as it is–but point noted,” he responded. Hopefully for Boingo investors, Finley will find a few other ways to grab the stock market’s attention in coming quarters.
Aaron Pressman
On Twitter: @ampressman
Email: aaron.pressman@fortune.com
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