DEF: Interactive Strength Seeks Reverse Split, Approves Dilutive Share Issuances

Interactive Strength Inc. will hold its 2025 Annual Meeting to vote on a reverse stock split to meet Nasdaq listing requirements, ratify auditor, and approve significant dilutive share issuances for an acquisition and executive compensation.

Summary

• The 2025 Annual Meeting of Stockholders will be held on September 26, 2025, to address key corporate actions.
• Shareholders will vote on the election of one Class II director, Aaron N. D. Weaver, to serve until the 2028 annual meeting.
• A proposal to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025, is on the agenda.
• Approval is sought for the potential issuance of 20% or more of outstanding Common Stock related to the Wattbike acquisition, including Series E Convertible Preferred Stock and Earn-Out Shares, to comply with Nasdaq Listing Rule 5635(a) and (d).
• The Wattbike acquisition was consummated on July 1, 2025, involving the issuance of 1,300,000 shares of Series E Preferred Stock and potential earn-out payments based on future Wattbike revenues (FY26 exceeding £17,500,000 and FY27 exceeding £20,000,000, each capped at £1,500,000).
• Shareholder approval is also requested for the issuance of 20% or more of outstanding Common Stock upon conversion of Series LTI Convertible Preferred Stock to executive officers and directors, as required by Nasdaq Listing Rule 5635(c).
• A total of 1,250,000 shares of LTI Preferred Stock were issued on June 14, 2025, potentially converting into up to 235,849 shares of Common Stock.
• The Board seeks discretionary authority to effect one or more reverse stock splits of Common Stock at a ratio between 1-for-4 and 1-for-100, to be completed by July 29, 2026, primarily to meet Nasdaq listing requirements and attract institutional investors.
• Advisory votes will be held on the compensation paid to named executive officers and the frequency of future advisory votes on executive compensation, with the Board recommending a three-year frequency.
• The company reported a net loss of $34,934,000 for 2024 and Adjusted EBITDA of -$10,589,000 for the same period.
• Total Shareholder Return (TSR) for an initial $100 investment since the May 2023 IPO was $13.03 in 2023 and $0.01 in 2024, indicating significant value erosion.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to severe financial losses, extremely poor shareholder returns, and the necessity of a reverse stock split to maintain exchange listing, indicating significant distress and potential for further dilution.

Positives

• The company is actively pursuing strategic acquisitions, such as Wattbike, to expand its business.
• Management is taking steps, including proposing a reverse stock split, to address Nasdaq listing compliance and potentially improve stock attractiveness to institutional investors.
• The company has established clear corporate governance structures, including independent board committees and a code of ethics.

Negatives

• The company reported significant net losses of $34,934,000 in 2024 and $51,373,000 in 2023.
• Adjusted EBITDA remained negative at -$10,589,000 in 2024 and -$16,999,000 in 2023.
• The Total Shareholder Return (TSR) for an initial $100 investment since the May 2023 IPO was extremely poor, dropping to $0.01 in 2024 from $13.03 in 2023, indicating substantial shareholder value destruction.
• The necessity of a reverse stock split (ratio 1-for-4 up to 1-for-100) to meet Nasdaq Capital Market continued listing requirements suggests a critically low stock price.
• The proposed issuances of Series E Preferred Stock for the Wattbike acquisition and LTI Preferred Stock for executive compensation are highly dilutive to existing common stockholders, potentially reducing their ownership percentage and influence.
• The company has engaged in multiple related party transactions, including issuing and repaying secured notes and promissory notes, and converting notes to preferred stock, which may indicate ongoing financing challenges.

Risks

• Significant dilution to current stockholders from the conversion of Series E Preferred Stock (Wattbike acquisition) and Series LTI Convertible Preferred Stock (executive compensation), potentially exceeding 20% of outstanding shares.
• Failure to obtain shareholder approval for the dilutive issuances could impact the Wattbike acquisition terms or require redemption of LTI Preferred Stock for cash.
• The reverse stock split may not achieve its intended benefits, such as a sustained increase in stock price or improved liquidity, and could be viewed negatively by investors.
• Even with a reverse stock split, there is no assurance the company will continue to satisfy all Nasdaq listing criteria.
• Future financings, which may be necessary to fund operations, will likely result in further significant dilution to stockholders.
• The company's ability to achieve Wattbike earn-out targets (FY26 revenues exceeding £17,500,000 and FY27 revenues exceeding £20,000,000) is uncertain and impacts potential additional consideration.

Future Outlook

The company intends to continue evaluating the roles and responsibilities of its management team as its business and operations evolve. It plans to reassess the designation and composition of its executive officers as appropriate. The company also aims to utilize one or more Reverse Stock Splits to meet contractual obligations and retain flexibility for future corporate actions, including potential future financings to fund continuing operations.

Management Comments

• "Your vote is important. Please vote as promptly as possible even if you plan to attend the Annual Meeting."
• "We encourage you to vote over the Internet, by telephone, or by completing, signing, and dating the proxy card, and returning it in the enclosed envelope."
• "We intend to continue to evaluate the roles and responsibilities of our management team as our business and operations evolve, and to reassess the designation and composition of our executive officers as appropriate and in consideration of applicable rules and regulations."
• "The Company intends to utilize one or more Reverse Stock Splits in order to meet its contractual obligations and retain enough flexibility for future corporate actions."
• "The Company believes that the Reverse Stock Splits may make its Common Stock more attractive to a broader range of investors, as it believes that the current market price of the Common Stock may prevent certain institutional investors, professional investors and other members of the investing public from purchasing stock."

Industry Context

The company operates in the competitive smart home gym industry, as evidenced by the Chief Technology Officer's prior experience at Peloton Interactive, Inc. The acquisition of Wattbike suggests a strategy to expand product offerings or market reach within the broader fitness technology sector. The need for a reverse stock split to maintain Nasdaq listing is a common challenge for smaller, growth-stage companies that have experienced significant stock price declines, reflecting broader market pressures or company-specific performance issues within their industry.

Comparison to Industry Standards

• The company's Total Shareholder Return (TSR) of $0.01 for an initial $100 investment in 2024 (following a $13.03 return in 2023 from a May 2023 IPO) is significantly below typical market and industry benchmarks, indicating severe underperformance compared to the broader market or even struggling peers like Peloton, which, despite its own challenges, has not seen such a drastic value erosion post-IPO.
• The consistent net losses and negative Adjusted EBITDA for 2022, 2023, and 2024 suggest that the company's financial performance is well below profitability standards for established companies in the fitness tech industry, and even for many growth-stage companies that typically show a clearer path to profitability or stronger revenue growth to offset losses.
• The necessity of a reverse stock split to maintain Nasdaq listing indicates that the company's stock price has fallen below the minimum bid price requirement, a situation often faced by companies struggling with market confidence and operational performance, contrasting with more stable or growing industry players.

Management Changes

Corporate Governance

Related Party Transactions

• In March 2023, the company issued $0.5 million of senior secured notes to a related party, which were repaid in May 2023.
• In November 2023, the company issued secured promissory notes of approximately $0.8 million with a related party.
• In February 2024, in connection with the CLMBR acquisition, the company assumed secured promissory notes of approximately $0.5 million with a related party, which were converted to Series A Preferred Stock.
• In April and May 2024, the company issued promissory notes of approximately $0.4 million with a related party; $0.2 million was converted into Series A Preferred Stock in May 2024, and $0.2 million was repaid in June 2024.
• In August 2024, the company borrowed $0.2 million from a related party.

Stakeholder Impact

• Shareholders face significant dilution from the potential issuance of Common Stock upon conversion of Series E Preferred Stock (Wattbike acquisition) and Series LTI Convertible Preferred Stock (executive compensation), which will reduce their percentage ownership and voting power.
• Existing shareholders will experience a decrease in book value per share and potential future earnings per share due to the dilutive issuances.
• The proposed reverse stock split, while intended to meet Nasdaq listing requirements, carries the risk of not proportionally increasing the share price and could negatively impact market perception and liquidity for shareholders.
• Executive officers and directors are direct beneficiaries of the LTI Preferred Stock issuance and potential equity compensation, aligning their interests with company performance but also contributing to shareholder dilution.
• The Wattbike acquisition, financed in part by Series E Preferred Stock and earn-out shares, impacts the former Wattbike shareholders and noteholders, who become new stakeholders in Interactive Strength Inc.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on September 26, 2025.
• Shareholders will vote on the election of a Class II director, ratification of Deloitte & Touche LLP, approval of Wattbike and LTI share issuances, and discretionary authority for a reverse stock split.
• If approved, the Board may effect one or more reverse stock splits no later than July 29, 2026.
• The company will continue to evaluate management roles and responsibilities as the business evolves.
• Future financings may be pursued to fund continuing operations.

Key Dates

Recommendation

The company's financial performance is severely distressed, evidenced by substantial net losses and negative Adjusted EBITDA across multiple years. The Total Shareholder Return (TSR) since its May 2023 IPO indicates near-total value destruction for investors. The necessity of a reverse stock split to maintain Nasdaq listing signals a critically low stock price and significant market concern. Furthermore, the proposed share issuances for the Wattbike acquisition and executive compensation are highly dilutive, exacerbating the negative impact on existing shareholders. These factors collectively point to a company facing severe challenges with a high risk of further value erosion.

Keywords

Interactive Strength, Forme, SEC filing, proxy statement, reverse stock split, Nasdaq listing, share dilution, Wattbike acquisition, executive compensation, corporate governance, financial performance, stock options, preferred stock, fitness technology, smart home gym