Tough days ahead for Tonal, as valuation may drop 90%

Tonal, the once booming at-home trainer that was valued at $1.9 billion back in 2021, is in a desperate crunch for cash. Today the company is reportedly struggling to find a buyer and now may drop its valuation by nearly 90% in a bid to keep the company alive.

Since the downturn in business post-pandemic, the company has reportedly been urgently trying to raise capital and cut costs, all the while looking to replace its CEO, currently founder Aly Orady. But now a fresh round of bad news has landed.

The Information reports that “private equity firm L Catterton, a current Tonal shareholder, is in talks to lead the funding round, which is expected to total $125 million at a valuation of between $200 million and $300 million.”

Of course, this radical move comes at a steep price for many existing investors, according to the report, with investors from previous rounds likely to see their stakes drastically reduced or wiped out completely for the smaller shareholders.

The news that Tonal was seeking a buyer broke earlier this year, with Peloton first eyed as an option. The two companies had already been in discussions last year about a sale, but negotiations fell through, partly because Peloton had been having its own financial troubles post-pandemic, and the two companies couldn’t agree on a price. Since, Tonal has been slashing staff, including all of its original coaches, and closing up stores, all while battling a lawsuit with its major supplier, Foxconn, over complaints that Tonal stopped paying its bills.

Among Tonal’s shareholders are celebrities like Stephen Curry and Maria Sharapova, and investors have injected more than $520 million into the company since its founding in 2016. The pandemic certainly gave companies like Tonal (and Peloton) a huge boost, but as lockdowns lifted and people ventured back out to gyms, Tonal has struggled to pivot and gain new customers, despite opening up expensive brick-and-mortar showrooms and boosting advertising.

While its competitors Peloton and Mirror have cut prices to increase sales, Tonal has taken a different approach by raising them. Marketed as one of the most upscale at-home fitness products on the market, its workout station is priced at $3,995, along with a nearly $60 monthly subscription.

What this means for Tonal users and fans, we’re not sure, but surely this could provide a much-needed lifeline for the company to stay afloat a little longer in time to switch gears.

Stay tuned for Connect the Watts for any news updates.