Peloton Interactive Inc. jumped as much as 15 per cent after a US$1 billion stock offering drew the interest of major investors, a sign Wall Street is ready to look past a grim forecast earlier this month.

The shares rose as high as US$54.45, marking the biggest intraday gain since March. The stock had declined 45 per cent since Peloton slashed its annual revenue forecast by up to US$1 billion on Nov. 4. The company also lowered its projections for subscribers and profit margins, renewing concerns that the end of the pandemic would bring a prolonged slump. 

The stock sale announcement initially jarred investors, who sent the shares down 8 per cent in early trading. The move would dilute current holdings, but Peloton vowed to use the money to step up growth -- helping restore optimism in the company. Durable Capital Partners LP, TCV, and funds and accounts advised by T. Rowe Price Associates Inc. all expressed an interest in buying shares, the company said. 

The rally also may reflect a sense that the preceding selloff may have been overblown. In a report, Bank of America analysts noted that the company’s monthly churn rates remain low and Peloton is a leader in its industry.

“Peloton has been our most disappointing stock in 2021, but we think in-home fitness growth is far from over,” analysts Justin Post and Joanna Zhao said in the report.

This is the first public stock sale for Peloton since its 2019 initial public offering at US$29 per share, according to data compiled by Bloomberg. Goldman Sachs Group Inc. and JPMorgan Chase & Co., the two lead banks on the IPO, are underwriting the new deal.

On its quarterly earnings call earlier this month, Peloton said it underestimated the impact of economic reopenings on people’s desire to continue working out from home. Its fiscal first-quarter results missed analysts’ estimates for revenue and loss per share. But another figure also caught analysts’ attention: Free cash on hand shrank by about US$680 million from the previous quarter, leaving Peloton with about US$924 million of cash and equivalents.

Short interest in New York-based Peloton has grown this year. It comprises 9.5 per cent of the public float, according to data from financial analytics firm S3 Partners. 

Analysts peppered executives on the earnings call with questions about the cash situation, and Chief Financial Officer Jill Woodworth said, “We don’t see the need for any additional capital raise based on our current outlook.”

In a statement Tuesday, Peloton reiterated that the company is “sufficiently capitalized.”

“We see an opportunity to expand our liquidity position to ensure we are making the best strategic decisions for Peloton’s medium and long-term growth opportunity,” Peloton said.

Peloton’s offering priced 23.9 million shares at US$46 each. The company expects to see net proceeds of US$1.07 billion.