Today in the Market (5/10/2022)

Good Evening. Markets struggled to rebound from a dramatic sell-off that dropped all three main indexes to their lowest levels year-to-date to start the week, leaving US equities unsettled at the close of a bumpy session Tuesday.

After closing below 4,000 for the first time since March 2021 on Monday, the S&P 500 gained 0.25%. The Dow Jones dropped 0.26%, for the fourth day in a row, while the Nasdaq Composite surged 0.98%.

EARNINGS

Peloton Interactive (PTON) saw its stock drop on Tuesday after the training equipment company cautioned investors that its growth was stalling.

In Peloton’s fiscal third quarter, which concluded on March 31, subscriber revenue increased by 55% year over year to $369.9 million. The company had 2.96 million connected fitness subscribers at the end of the quarter. These are people who have acquired a Peloton cycle or treadmill and pay a monthly fee to participate in virtual workouts.

Peloton’s sales from linked fitness goods, on the other hand, fell by 42% to $594.4 million. As the number of COVID-19 cases declines, more individuals are returning to gyms, while fewer people are purchasing the company’s in-home workout equipment. Peloton’s total sales fell by 24% to $964.3 million.

Peloton expects its membership growth to slow significantly as equipment sales slow. By the end of the fourth quarter, management expects connected fitness subscriptions to reach 2.98 million, representing a sequential growth rate of less than 1%. The company also predicted a 27% drop in total sales from the fourth quarter of fiscal 2021 to the fourth quarter of fiscal 2022.

At Closing, PTON fell by 8.70% to $12.90 per share.

REGULATORS

Goldman Sachs has informed SPACs that it needs a break. Now that regulators are tightening down on the contentious financial mechanism, the investment bank, which was the second-largest underwriter of SPACs last year, is terminating its engagement with the majority of those companies.

SPACs gained a lot of traction early in the epidemic as a vehicle for private companies to go public.

  • A SPAC (special purpose acquisition company) is essentially a shell company that goes public before acquiring a private company and bringing it public.

A company can escape the scrutiny necessary by the regular IPO process by opting for SPAC, and celebrities have discovered that generating awareness for a SPAC they partner with can be lucrative.

It was all quite shady, and the regulators weren’t going to let it go on indefinitely. The SEC issued a plan in March that outlined extra requirements for SPACs, robbing them of their allure for underwriters like Goldman Sachs, who would be exposed to more risk under the new criteria.

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