What happened
Shares of Peloton Interactive (PTON 4.29%) were popping today on multiple reports that showed the connected fitness company gaining interest as a potential acquisition target.
Activist investors have pushed the company to sell itself, and media reports on Friday indicated that both Amazon and Nike were considering making an offer. Some analysts suspected Apple could even get in on a potential bidding war.
As of 2:32 p.m. ET today, Peloton stock was up 19.7% on the news.
Image source: Peloton Interactive.
So what
Peloton shares first jumped in after-market trading on Friday when The Wall Street Journal reported that Amazon had been talking to advisors about a potential deal, and Financial Times also said that day that Nike was considering an offer.
Any potential deal is still in its early stages. Neither Peloton nor any of its potential suitors gave a comment on the matter, and it's not even clear if the high-end exercise equipment maker is up for sale.
Shares of Peloton have plunged over the past year as its revenue growth has ground to a halt as management overestimated demand, leading to excess spending and wide losses. Activist investors have pounced on the opportunity, and Blackwells Capital called on the board to fire CEO John Foley and put the company up for sale.
Peloton has not responded to the letter and hasn't given any indication that the company would entertain a sale. It may also be difficult for Blackwells to force an acquisition as Foley and other insiders control more than 80% of the company's voting power.
Now what
If Peloton does seek a buyer, it could attract interest from multiple parties as the company has a well-known brand with a cultlike following and is widely recognized as a leader in connected fitness. A tie-up with a company like Apple or Nike would make sense in a lot of ways.
However, Foley and the rest of the management team may be reluctant to wave the white flag as the stock is down more than 80% from its peak and is now only on par with its initial public offering price in 2019. Seeking a buyer would be admitting defeat and that the company was little more than a pandemic fad.
In all likelihood, the Peloton chief would prefer to prove on his own that the challenges the company faces at the moment are only temporary.
