Peloton Joins Convertible Note Craze With $1 Billion Raise

    • Peloton announced plans to raise $1 billion through convertible notes.
    • The fundraising method, which combines bonds with equity, has grown increasingly popular in recent years.

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The wheels are spinning faster and faster for the connected stationary bike maker.

Peloton issued convertible notes with the intention of raising up to $1 billion, and successfully secured the entire amount.

The company was originally looking for $600 million, but widespread interest drove the amount higher. It will pay 0% interest on the notes until they mature in Feb. 2026.

Convertible notes are a type of short-term debt, combining the security of corporate bonds with the growth potential of equity. Investors can receive a modest return at a scheduled date, similar to bonds, or convert their investment into company shares. They’ve become a popular fundraising method.

  • The convertible note market topped $100 billion in 2020.
  • Square, Uber, Tesla, and the DISH Network are among the companies that have issued convertible bonds over $1 billion in the past two years.

Peloton will use some of the new funds to invest further in manufacturing and logistics, and to reach more customers. It previously bought fitness equipment giant Precor for $420 million, and committed $100 million to improving much-maligned delays in its supply chain.

With the pandemic keeping people away from gyms, Peloton appears to be seizing the opportunity to grow its market share. Apple is making a similar push with its Fitness+ service.