What are your thoughts on valuation?

Well, the question of what is and is not a tech company gets more interesting by the day for me.

And I heard your interview with the CEO of Peloton earlier.

And he was saying, software is their biggest investment.

He basically wants us to think of them as a tech company.

But in reality, you could increasingly say the same thing about CBS or Disney, or so many companies-- Walmart.

Just because a company uses a lot of software and has an app or has a screen, it doesn't mean that they're a tech company.

This is basically a company that sells exercise equipment that's being given an $8-billion valuation.

I think illogical.

Gene Munster over at Loup Ventures spoke with me earlier this week.

And he said he was really reassured by the fact that the IPO in the filing, Peloton was so transparent in their numbers-- relative to another company, like WeWork, which we'll put it on the backburner for now, which maybe wasn't as forthcoming with their numbers.

Are you relieved at the amount of financial transparency that we got with Peloton?

Sure.

To take a step back on Peloton, it's more like a $9.5 billion valuation at today's price, if you take into account the 60-million shares that are options, that are deep in the money.

So it's actually, I would say, a very nice valuation for a business with $1.4 billion in sales.

And I do think the market is ascribing a certain level of value to the subscription nature of the business, which is very high-margin business.

And if we want to call it technology, then we can.

We almost have to call anything today a technology component.

But what does it mean with respect to the transparency?

If you want to buy Peloton, you want to make a bet that they are going to grow their user base, that they are going to have very low churn, and that they are going to generate a lot of cash flow.

And that's an assessment that the investor has to make.

But that's a very different question of are they a tech company, or are they not a tech company.

It's purely a matter of how much money they're going to make in the future.

1. The initial public offering, or IPO, mentioned in the video is Peleton’s first offering to the public in which shares of Peloton’s stock are sold to investors. Upon issuance, what effect did this $1.16 billion raised in the IPO have on Peloton’s financial statements?

2. Why does the CEO of Pelton view the company as a technology company, and what does Techonomy Founder David Kirkpatrick think about the CEO’s statement?

3. If Peloton decided to buy back its own shares of stock shortly after the shares had been issued in the IPO, what effect would this have on total stockholders and why?

Answer rating: 100% (QA)

1 The initial public offering or IPO of Peloton raised 116 billion for the company This money would be reflected on the companys balance sheet as an increase in cash and cash equivalents This would re... View the full answer