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Peloton’s IPO disclosure: THIS is how you do it.

See? They CAN do it if they want to.


Turn to pages 63 and 64 of Peloton's S-1 if you want to see something extraordinary.

Churn!

And LTV!! And CAC!!

These are the numbers you need to 1) understand, and 2) model a company’s unit economics. And we almost never see them spelled right out in an S-1. Contrast this with WeWork’s recent 383-page S-1 – which was almost double the page-count of Peloton’s – in which the word “churn” didn’t even appear once. Unbelievably, WeWork didn't even admit the conceptual possibility of churn despite the obvious fact that its no-commitment month-to-month lease terms make it a churn machine. Not talked about in the prose, not quantified in the numbers. Contrast this with Lyft’s scrambling of discounts and incentives into its numbers such that actual GMV and revenue – per ride and overall – became unknowable, to say nothing of CAC. AND THEN Lyft’s doubling down on crappy disclosure on its first earnings call with the laughable claim that they would no longer disclose the number of rides or GMV so that investors wouldn’t get “confused.” Contrast this with Uber’s gymnastics of creative disclosure around its “core platform” while not telling investors how many of its “rides” were low-margin UberEats vs. some version of passenger Uber. WeWork, Lyft, and Uber all went to impressively extensive efforts to appear as if they were making fulsome disclosure while in fact completely hiding their unit economics. We tire around here sometimes when outrageous acts of partial and misleading disclosure by tech companies in their IPO prospectuses force us to call out what we can only judge to be willful obfuscation of key drivers that IPO investors are entitled to know before handing over millions or billions of dollars. The practice is so common we even Score for it – internally we call it the Obfuscation Index. But then, every so often, we see something like Peloton’s S-1 to give us hope that not everyone wants to hide every single ball they can. Could we whine that Peloton’s cheaper, no-hardware digital subs are lumped in with the connected-hardware subs? We could. Could we argue about how big Peloton’s market is beyond the you-and-me-and-all-of-our-friends core urban demo of people with too much money, and what happens to CAC and churn in a recession? Both arguable for sure. But what isn’t arguable is that the unit economics of Peloton historically make absolute sense. And the reason we know this is that Peloton decided to be an outlier, show investors some respect, and print the key metrics to calc. it out right in the S-1. Investors can see in math that acquiring new subs is an intrinsically profitable thing for Peloton to do, so it makes perfect sense that IPO investors would give Peloton more money to keep doing it.  Would the unit economics at WeWork, Lyft, or Uber tell the same story if they’d been disclosed?

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