Tonal Systems Inc., the at-home fitness startup, is seeking to raise capital at less than a third of its previous valuation and is considering replacing its chief executive officer, according to people familiar with the matter.
The company is in talks for funding that would value it at $500 million or lower, the people said, asking not to be identified because the matter is private. That’s a deep cut compared to last year’s $1.9 billion valuation, reflecting the slowdown in the home fitness industry, but talks are still ongoing and the number could change.
Tonal also expects to find a new CEO to replace founder Aly Orady this year, said the people. Orady, who founded the company in 2015, could potentially still be involved and have a role, they added. The plans aren’t finalized and Orady could still stay on.
Tonal previously had discussions with Peloton Interactive Inc. last year about a potential sale to the publicly traded fitness company, the people said. Yet an acquisition did not materialize, in part because Peloton has been trying to improve its cash position and the two parties couldn’t agree on price, they added. Tonal also had acquisition conversations with other strategic buyers, said the people.
It has been a tumultuous time for the home fitness industry. The businesses benefited from the early days of the pandemic, when many gyms were closed and people were stuck at home. But difficulties in maintaining that growth trajectory contributed to a slowdown in some businesses like Peloton. Companies that had raised capital using Peloton’s market capitalization as a comparison are now having to readjust.
Representatives for Tonal and Peloton declined to comment. Orady didn’t immediately respond to a request for comment.
The Information reported on Friday that Tonal had tried to sell itself and was exploring options to shore up its business including lining up fresh capital.
As of last summer, Tonal was on track to…