The graph above depicts how Peloton’s stock soared in after-hours trading and opened substantially higher than its Friday closing price (Source: Yahoo Finance)
February 8, 2022
Shares of Peloton (PTON) surged 28.5% before the market opened on Monday after rumors circulated of a deal for Amazon (AMZN) and Nike (NKE) to buy the fitness machine company. Analysts have speculated that Apple (AAPL) may also dabble in the expected acquisitions.
Although the deal isn’t finalized nor imminent, it is undoubtedly warranted due to Peloton being battered within the past year. After the initial frenzy at the start of the pandemic, the company saw a substantial slowdown in stationary-bike purchases, and supply chain issues have delayed existing orders. The company’s market value has dipped from $50 billion around a year ago to about $8 billion today. Their stock closed on Friday at $24.60, which was below their 2019 IPO price of $29.
The company’s shares also saw a significant selloff following an episode within the reboot of “Sex and the City” on HBO Max depicted a character die due to a Peloton. However, Peloton partnered with Ryan Reynold’s marketing company, Maximum Effort, to create a clever advertisement that rebounded the stock price somewhat.
Discussions of a bid for Peloton have not become public, and none of the potential buyers, Nike, Apple, nor Amazon, have made any statements regarding it. The idea behind these companies’ acquisition comes after activist group Blackwells Capital, which has a less than 5% stake, has suggested the company consider a sale. A letter to the Peloton board from Blackswell called for Peloton’s CEO, John Foley, to be immediately laid off. They also stated that the most logical move would be a buyout from Amazon or Apple.
Amazon has made significant acquisitions in the past, such as Whole Foods for $13.7 billion in 2017 and MGM Studios for $8.45 billion last May. Recently, Amazon has dipped its toes into health-related venturesby launching Halo Health and Wellness Tracker. If they acquired Peloton, the company could also include the workout equipment subscription into yearly Prime memberships.
Wedbush securities analyst Dan Ives claimed that they “would be shocked if Apple is not aggressively involved in this potential deal process” as well. With the Apple Watch and its Fitness+ subscription, the tech giant would not be wise to forgo such a fantastic opportunity.
Peloton is estimated to be sold at between $12 and $15 billion, which is not a stretch due to the stock surge Monday increased their market cap to $9.823 Billion, and they have $200 billion in cash holdings. The fitness machine company also has 2.8 million subscribers with churn rates of around 1%. Peloton’s services can be transitioned to an established company like Apple. The technology aspect fits Apple’s business model too. Therefore, Apple getting involved in the deal should not be out of the realm of possibility.
Nike had their hand in the ring before either of the companies mentioned above. The apparel giant considered an offer before Peloton went public in 2019 yet backed out of it because the company wanted to focus on software rather than hardware.
Potential for a Nike buyout may be possible but may not fit their new digital strategy. Despite the acquisition of RTFKT, a producer of non-fungible tokens (NFTs), Nike may not be turning their eyes toward Peloton. A purchase of Peloton by Nike could prove disadvantageous because it requires the apparel company to learn how to build these complex machines. Nike is also unfamiliar with transporting such large packages, which could add to Peloton’s supply chain problems.