What happened
Shares of gym specialist F45 Training (FXLV) soared in early trading on Friday, rising 42% by 11 a.m. ET. The surge erased just a small part of recent losses, though, and the stock remains down by roughly 70% so far in 2022.
The rally was powered by news that the company has received a preliminary offer to explore going private.
So what
F45 Training got an acquisition offer from Kennedy Lewis Investment, according to a Friday morning filling with the Securities and Exchange Commission. Kennedy Lewis believes the business will be more valuable operating as a private company, and so it is considering purchasing F45 Training for $4 per share in cash.
That valuation is far lower than what investors saw the stock trading for earlier in the year, but the shares collapsed in recent months due to decelerating sales trends and a shake-up on the management team.
Now what
Investors can't count on this offer going through. Executives described it as a non-binding proposal, after all, or more of a preliminary notice of interest. Kennedy Lewis Investment would likely expect to see more financial details about the strength of the business, for example, before making a concrete offer.
Financing for any proposed deal might be a challenge, too, because debt markets have been volatile lately as interest rates rise. However, if the two companies agree to a buyout, F45 Training would be headed toward going private at a cash price of roughly $4 per share.
The stock is still trading well below that level today, likely reflecting concerns about the chances that the deal falls through. Other reasons to steer clear of this stock include its slowing sales trends and expanding net losses. In any case, investors can expect more volatility ahead with this small-cap stock.
