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Analyst: Peloton’s IPO is tinged with IP-infringement concerns

Business analyst to online exercise/fitness class company Peloton: Your upsides are impressive, but don’t underestimate some sizable risks as you prepare for your company’s impending initial public offering.

If you’re into fitness, you likely know about Peloton. The commercial start-up has experienced heady success since its inception. Its streaming services enabling users to access interactive workout programs with accompanying music have become globally popular.

In fact, Peloton’s success has brought it to the verge of an IPO slated for later this month. The above-cited analyst states that a bandied-about company valuation of about $8 billion is “palatable.”

Impliedly, he notes, it should also come with an asterisk. Notwithstanding its noted attractiveness for investors, Peloton is far from being risk-averse. Reportedly, the company faces at least two distinct challenges that could spell sharp downsides for its IPO and continued operations.

One of them is the unsettling trade war currently being waged between the United States and China. Much of Peloton’s equipment is made in China and now being purchased with tariff penalties attached.

The other concern relates to intellectual property, namely, the copyrights to music that Peloton makes accessible to its paying customers. The owners of that output obviously have royalty rights concerning those creations and want to be paid when their work is played.

They aren’t getting their money.

At least some of them are reportedly being stiffed on what is owed them, according to a lawsuit filed earlier this year by multiple music publishers acting on behalf of myriad entertainers. We reported on that litigation in our March 26 blog entry, noting its central allegation that Peloton’s vague “sync licenses” rip off artists to a “knowing and reckless degree.”

That litigation is not yet resolved, and could ultimately end up costing Peloton $150 million or more.

The analyst commenting on the public offering underscores the need for Peloton to quickly settle the matter and otherwise deal with concerns regarding IP and other risks facing the company. If perceived challenges are not timely addressed and dampened, Peloton’s valuation and future prospects could suffer.

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