Has the US IPO market reached a high level of fitness?

Based on Thursday’s market, the latest fitness company – Life Time Group Holdings – has been in the business for some time, while another iFit Health & Fitness this week has postponed the deal citing poor market conditions.

Life time group LTHThe Minnesota-based fitness chain saw the $ 18 share price, supported by private equity firm Leonard Green and Partners, at the lower end of the target range. The company sold 39.0 million shares and raised $ 702.0 million. The first trade of the stock It traded $ 16.57 at 10:42 am for 1.8 million shares. At that price, the company was worth $ 3.28 billion. The stock is trading on the New York Stock Exchange under the “LTH” symbol.

It wanted to raise $ 6.7 billion to $ 647 million, including the largest fitness equipment in the US, including IFIT, Nordicrack, Proform and Freemasonry. The company “will continue to evaluate the proposed delivery time” He said in a statement.

For investors, the move may not come as a surprise in terms of the flood of companies in the fitness market to hit the public market this year, for all those who want to take advantage of the “health” outcry.

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In July, the market took over IPOs F45 training
FXLV,
-0.34%

And Xpontial Fitness
XPOF,
-4.33%
.

F45, an actor, producer and fitness enthusiast Mark Walhberg, has raised $ 325 million worth of $ 1.5 billion worth of fitness studio franchise. The owner of brands including Xponential, boutique fitness brand Francis and CycleBar and Pure Barre has raised $ 120 million.

These come after the February three-way merger between Sea Bood, MYX Fitness, and Peloton Interactive Inc.
Peton,
-3.35%

Competitive, and Special Purchasing Corporation, or SPAC, Forest Road Acquisition Corp. Named at $ 2.9 Billion.

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Among the other deals on the pipeline is Echolon, a stationary bicycle maker and Peloton rival, seeking fitness and personal funding or IPO, and Hydro is reportedly considering an IPO or SPAC contract.

Yoga Marsh maker Lululemon Athletics
Lulu
+ 0.50%

Launched in June 2020. Finding a mirror, An indoor fitness company with an interactive fitness platform, for $ 500 million.

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Most of these companies suffered losses during the 2020 epidemic, often causing them to be banned from the gym. U.S. Fitness Club Industry According to IHRSA, the Global Health & Fitness Association has lost $ 20.4 billion by 2020. That means many of these companies now need cash to stay afloat.

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So how should investors evaluate the benefits of all these agreements?

Katio Liu, research partner at IPOCS Schoster LLC, which operates the IPOX indexes, suggested that the companies be divided into four categories: equipment, platforms, gym and mix, and how their business model could be in the future or how their “sticky” product offerings could be.

“The Peloton and Ififit 80/20 devices are once-in-a-lifetime purchases compared to subscriptions,” Liu told MarketWatch. “All you need to do is invest in content and build subscriptions.”

At the time of the outbreak, traditional gyms were severely damaged, but remained popular with users. Planet Fitness
PLNT,
-0.08%
,
For example, “he was crazy,” says Liu. That company has been public since 2015 and has acquired about 350% during that time.

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Hybrid companies that combine gym and platform, companies such as Xponential and F45, offer classes in studios in centralized training programs and offer on-demand courses. “Because those companies have physical space and content and that means a source of revenue, they can suffer less,” Liu said.

The most vulnerable companies in the field are pure platforms because they sell regularly updated content and registrations that require new coaches so that their customers do not get bored repeating the same process for months.

“There is no sticking there. People try to find the cheapest and if the content is not up to date, go ahead and try it next. ” “You need to think about how you can keep your subscribers.”

Deep diving

When we take a closer look at the financial situation of the three recent agreements, they are closely linked from a financial health perspective – but not in a positive way.

RapidRatings, a company that monitors the finances of public and private companies, F45, Life Time Group and Xponential Fitness Financial Health ratings, or FHRs, are ranked between 31 and 37 out of 100, placing all three at “high risk.” Category. Financial health is a measure of short-term risk.

For F45, FHR stopped at the end of the year 31, compared to 30 in December 2019, before the outbreak began.

“This rating puts the company at the top half with a high risk of 2.56% over the next 12 months,” RapidRatings said in a statement. “This is the FHR and default default Poor Core results.
Health and Current Weaknesses in Benefits and Income Performance.

The main health score, or CHS, measures the efficiency of a two- to three-year vision. The F45 had 28 CHS at the end of the year, compared to 30 at the end of 2019.

Life Time Group’s FHR fell to 32 at the end of the second quarter, December 41, 2019, and its CHS dropped from 41 to 20.

Xponential Fitness’FHR rose from 31 to 37 by the end of 2019. His CHS rose from 26 to 43, placing him in the “middle-risk” category.

All three companies are currently suffering from negative cash flows, and they have not been able to cover capital expenditures or debt balances with internal cash flow, RapidRatings said.

Another reason behind the recent transfer congestion is the success of Peloton.

A.D. At the end of 2019, Peloton was released to the public in a timely agreement with the outbreak, which began in early 2020 and forced many workers to stay home. That combined increased demand for treadmills and exercise bikes. By 2020, Peloton sales have more than doubled to $ 4 billion, compared to $ 1.83 billion last year.

Since then, the collection has been damaged by the memorandum of precious treadmills; Following injuries to children and loss of life As well as some supply chain issues that are currently hampering many companies. A.D. In 2021, the stock lost more than 40%, but after the IPO it still gained more than 277%.

Renaissance IPO ETF
IPO,
-0.95%

So far this year, it has gained 0.5%, the S&P 500
SPX,
+ 0.27%

He got 18%.

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