Exercise bike maker NordicTrack has been slapped with a $300 million lawsuit that threatens to force the company into bankruptcy, The Post has learned.
iFIT Health & Fitness – which dropped plans to go public in October after rival Peloton revealed demand for exercise bikes due to the pandemic was plummeting – has been sued by a key lender over a deal the company quietly reached to acquire a manufacturing partner, according to a blowout lawsuit.
The suit from Pamplona Capital Management — a hedge fund that loaned iFIT $200 million in 2019 — claims the deal with the unnamed manufacturer in China violates its loan agreement because it includes distributing a stake in the maker of NordicTrack, according to court documents and sources familiar with the situation.
Martin Schwab, a Pamplona executive who sits on the iFIT board, opposed the deal after learning about it at a Dec. 8 board meeting, but was pushed back, according to the lawsuit filed January 18 in New York State court and sources close to the situation. . Schwab declined to comment.
Insiders say the lawsuit – which is demanding $100 million in interest on top of the principal of its $200 million loan – comes as iFIT’s finances have already apparently been thrown into chaos. The IPO – canceled at the last minute due to “unfavorable market conditions” – was expected to raise $650 million. iFIT has since continued to burn cash as demand for exercise bikes has waned, sources said.
IFit recently tapped investment bank Lazard to help arrange new funding, the sources added. Bankruptcy attorneys for the company’s longtime counsel Weil Gotshal, including legendary restructuring lawyer Ray Schrock, were also recently hired, according to a source familiar with the company.
“They’re running out of money and it’s only a matter of months before it runs out,” the source speculated.
IFIT declined to comment. Weil Gotshal and Lazard did not immediately respond to requests for comment.
Early last year, iFit hired Olympic gold medalist Michael Phelps as its brand ambassador and launched an aggressive marketing campaign. Its workforce has grown to 2,500, according to the IPO filing.
But shortly before Christmas, iFIT made surprise layoffs for hundreds of software, marketing and home delivery workers, according to news reports and social media posts. An iFIT employee claimed to Reddit that employees weren’t even being offered severance pay.
In its IPO prospectus last year, iFIT said that despite doubling its revenue to nearly $1.8 billion in the fiscal year to May 31, its losses soared to more than $500 million, leaving less than $600 million on its balance sheet.
Founded in Utah in 1977 by billionaire Scott Watterson, iFIT has recently been locked in multiple intellectual property lawsuits with Peloton, each accusing the other of copycat tactics. But more recently, they’ve both been hampered by the rapidly declining demand for home exercise equipment. Peloton’s beleaguered CEO John Foley last week denied media reports of a halt in manufacturing due to falling demand.
“Both companies are hungover post-pandemic and no longer able to achieve their past growth rates,” a source close to iFit said.