Editor’s Note: At the age of 65, I’m still a kid at heart. Most days, I’m either playing pickleball, golfing, or hitting the gym.

But when I had my left knee replaced four months ago, I had to stop doing those things for a while. Instead, my surgeon suggested that I ride an exercise bike until my leg was stronger.

Fortunately for me, my daughter has a Peloton stationary bicycle that was taking up too much space in her basement. A few weeks after my surgery, I drove twelve hours round trip so I could pick it up and bring it back to my house in North Carolina.

It now sits in my garage, where I have yet to use it. I prefer riding my bike outdoors, where I can smell the fresh air and see what’s new in the neighborhood.

I don’t know if I’ll ever use the Peloton bike now that my leg is getting stronger. Eventually, I will return it to my daughter when she has the space for it, where hopefully it will get some use.

Pandemic Beneficiary

I first wrote about Peloton Interactive (NSDQ: PTON) in June 2020 (“Peloton Craze Leaves Investors Spinning in Circles“), nine months after the company went public at a $29 a share. It did not deviate much from that price until COVID-19 shut down gyms and other public gathering places the following spring.

But once the pandemic took off, so did PTON. By the last week of 2020 it was trading above $160. At that time, Peloton was one of the few businesses thriving due to the pandemic.

The good news is that pandemics don’t last forever. It was only a matter of time until vaccines became available that allowed gyms to reopen.

However, that was bad news for Peloton shareholders. By March 2022, PTON was back under $30.

Circling the Drain

I predicted Peloton’s demise in May 2021 (“Peloton Shareholders Are Being Taken For a Ride”). By then, Amazon.com (NSDQ: AMZN) had teamed up with a bike manufacturer to compete with Peloton.

Peloton had other problems. Tragically, a child died that year after being pulled under a Pelton treadmill. The company was accused of knowing about that design defect and not notifying the public. The company was looking at a large financial settlement plus a class action lawsuit.

Peloton needed cash in a hurry, and secondary stock offering was the fastest way to get it. However, the dilution to existing shareholders caused by that event was not welcomed on Wall Street.

Things got so bad for Peloton that its share price slipped below $3 three months ago. The company was presumed to be headed for bankruptcy as short sellers kept pushing its share price lower.

Coming Up Short

That all changed three months ago when Peloton released its fiscal 2024 Q4 results. Although the company acknowledged it did not turn a profit, it boasted that it “delivered positive Adjusted EBITDA* and Free Cash Flow* for the second consecutive quarter, something we haven’t accomplished since Q2 FY21.”

Suddenly, the inevitability of Peloton’s failure was no longer a sure bet. Some of the short sellers took note, closing their positions by buying shares of PTON to replace the borrowed shares they had already sold.

That is known as a “short squeeze” and can propel a stock rapidly higher. By October, PTON had risen above $5. After Peloton released its fiscal 2025 Q1 results a week ago, PTON shot above $8 (circled area in chart below).

Despite that big jump, short interest in Pelton is still high at roughly 18 percent of the float (shares trading in the open market). That means the short squeeze isn’t over if Peloton can avoid bankruptcy.

Guy Problem

I’m pulling for Peloton to make it. I don’t know if it can avoid going through a financial reorganization, but that doesn’t necessarily mean that it will go out of business. It could continue to operate while negotiating with its creditors.

Despite being unprofitable, Peloton has valuable assets including a strong brand and a loyal customer base. The challenge for the company is to make that base bigger.

That is why on November 1 the company announced that it is launching a “new multi-phase creative campaign to drive demand among new audiences.” According to the press release, “two-thirds of Peloton Members are women, which provides an opportunity for the company to attract more men to the platform by using targeted messaging that resonates with their fitness needs.”

In short, Pelton has a guy problem. To solve it, the company is hiring the Watt brothers (T.J. and J.J.) of NFL fame to pitch its products to young males.

I don’t know if that will work, but it’s worth a try. There are a lot of nervous short sellers out there hoping it will fail, but they may want to get out of harm’s way now in case Peloton can back on track.

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