2 Recent IPOs That Won’t Rebound in 2019

There doesn’t seem to be a lot of love for that new stock smell on Wall Street these days. More than 50 of the 114 companies that have gone public on stateside exchanges in 2019 are currently trading below their IPO prices, and the climate is only getting more unkind…

Peloton (NASDAQ:PTON) is the latest underwriter misfire, tumbling after the high-end fitness specialist went public on Thursday. September’s been rough, with other aspiring debutantes including co-working giant WeWork and Hollywood talent agency powerhouse Endeavor suspending their offerings at the last minute. No one said investing in IPOs would be easy.

Some of the current losers of this year’s rookie class will recover, but many of them won’t. Peloton joins Jumia (NYSE:JMIA) as two of 2019’s IPOs that don’t seem likely to bounce back in the year ahead. Let’s go over the challenges that will make it hard to fix some of 2019’s broken offerings.

Peloton

There’s a certain level of schadenfreude in watching last week’s Peloton offering fail. Who has $2,245 for a basic Peloton bike or nearly double that ransom for a treadmill? Why pay $39 a month for a subscription to make the most of the connected-fitness nature of the big-ticket workout gear?

In Peloton’s defense, a lot of people are flocking to its high-end fitness platform and sticking around. Revenue more than doubled in fiscal 2019, up 110% to hit $915 million. Once you make the costly investment to hop on the Peloton ecosystem, you tend to stay given the company’s 95% retention rate over the past year. There are 511,202 Peloton subscribers as of the end of June, with the average net monthly churn rate clocking in at a healthy 0.65%.

The rub for Peloton is that there is a ceiling as to how many people are willing to fork over thousands for in-home gear, an important part of the revenue mix since hardware sales account for 79% of its top-line results. Subscription revenue will be the driver eventually, but with so many gym memberships now running at lower price points, the value proposition that Peloton offers will continue to have a limited addressable market.

Jumia

There was plenty of hype when the leading online marketplace in Africa hit the market at $14.50 per share in early April. Investors thinking that they were buying into…

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