iFIT was recently hit with a $300 million lawsuit.
iFIT Health & Fitness was recently hit with a $300 million lawsuit that may push the company into bankruptcy. The company, known for its NordicTrack exercise bike, was sued by a “key lender over a deal the company has quietly cut to acquire a manufacturing partner,” according to the suit.
Pamplona Capital Management filed the suit. It’s a “hedge fund that lent iFIT $200 million in 2019.” According to the company, “the deal with the unnamed manufacturer in China violates its loan agreement as it includes handing out an equity stake in NordicTrack’s maker.” Martin Schwab is a Pamplona executive and sits on iFIT’s board. He “objected to the deal after learning about it at a Dec. 8 board meeting but was rebuffed.”
At the moment, the suit is seeking “$100 million in interest in addition to the principal of its $200 million loan.” It’s important to note that the suit couldn’t come at a worse time for the company, finance-wise. It turns out, the IPO, which was “canceled at the last minute because of adverse market conditions, was planned to raise $650 million.” To make matters worse, as demand for exercise bikes has continued to tank, the company has continued to burn cash. Recently, iFIT even reached out to Lazard, an investment bank, to make new financing arrangements. On top of that, the company has even reached out to bankruptcy attorneys.
The company’s current situation is a sharp contrast from where it was last year. In fact, in early 2021, iFIT “had tapped Olympic gold medalist Michael Phelps as a brand ambassador and launched an aggressive marketing campaign.” I also had about 2,500 employees on staff. Things went South after Christmas when the company announced “surprise layoffs for hundreds of software, marketing, and home delivery employees.”
The company was first founded in 1977 by Scott Watterson. Over recent years, it has been locked in a handful of lawsuits with Peloton “over intellectual property, with each accusing the other of copycat tactics.”
Even Peloton has been hit hard by the economy. iFIT isn’t the only company that has seen a drop in enthusiasm for its exercise bikes. Peloton has, too. In fact, last week John Foley, the CEO of Peloton, tried to squelch reports of a manufacturing halt linked to plummeting demand for home exercise equipment. In a letter to employees, he “acknowledged that Peloton was resetting our production levels for sustainable growth,” and added, “that reports the company was halting all production of bikes and Treads are false.”