Planet Fitness (NYSE: PLNT) had a weak debut Thursday, as the value-oriented fitness chain traded on the New York Stock Exchange for the first time. Its shares, originally priced at the top end of the expected range of $14-$16, hit a low of $13.75 before recovering to trade at the IPO price of $16. The stock fell as much as 10% from its IPO price.
After the American franchise of fitness centers reported a 33% rise in revenue to $279.8 million last year, higher-ups thought it was time to release shares to the public market. With the underwriting support of big investment firms like JP Morgan (NYSE: JPM), Merrill Lynch, Jefferies, Credit Suisse (NYSE: CS), and Piper Jaffray (NYSE: PJC), the New Hampshire-based company had high expectations for its IPO. Before going public, the fitness club operator was valued at $1.58 billion. Private equity firm TSG Consumer Partners is its largest shareholder with a 67.9% stake.
According to its IPO prospectus, Planet Fitness expects to open more than 1,000 new stores in the next seven years. Forbes gave the stock a neutral rating, citing misleading reports of profits and skeptical growth expectations.
Expectations Losing Weight
Analysts don't seem too excited about this IPO, either. Although Planet Fitness, home of the $10-a-month gym membership, has posted profit and growth the past few years, the growth does not seem sustainable. Much of their revenue comes from one-time streams, like other businesses buying equipment for new stores - the gym may not be able to stand up to an upcoming competitor. Analysts at investment research firm New Constructs say, “Apart from discouraging weightlifters or ‘hardcore gym users,’ Planet Fitness’ offering is not especially attractive in any way, except maybe price.”
This IPO is the latest in a string of fitness and healthcare-related companies that have gone public. Planet Fitness joins wearable fitness device maker Fitbit Inc. (NYSE: FIT) and cloud-based health and fitness platform provider Mindbody Inc. (NYSE: MB).