To The Moon

Peloton Interactive Inc. — the early pandemic home-fitness darling that’s become a potential takeover target after a sharp plunge in its stock price — could find a challenging climate if it opts for a deal with a big technology company.

What's happening:  

In late January, after declining nearly 24% in one day. Rumors of a possible Peloton acquisition sent the stock soaring 21% today. Rumor has it that companies like Amazon, Apple, and Nike all have an interest in purchasing Peloton.

Peloton's epic collapse:

The company's stock has dropped more than 80% since early 2021, erasing $40 billion in market value.

Quick rewind:

Plenty of firms clearly smell a deal. Peloton's shares have plunged more than 80% from their high in January 2021. They've come under renewed pressure in recent weeks following a report that the company had stopped manufacturing new bikes and treadmills. CEO John Foley has denied this, but said Peloton is "resetting" production levels as it adapts to more "seasonal demand curves." He acknowledged the need to slash costs and said the company is "considering all options as part of our efforts to make our business more flexible," including layoffs. 

One of Peloton’s stakeholders, Blackwells Capital has a different idea. Activist investor Blackwells Capital LLC last month issued a letter demanding the company fire co-founder and Chief Executive Officer John Foley and pursue a sale. Blackwells said in the letter that potential buyers could include Apple Inc.,Walt Disney Co., and Nike.

The case for Amazon: 

Multiple news outlets have said Amazon is interested. The online retailer has started ramping up its health and wellness offerings, launching the wearable Halo fitness tracker in 2020. But it could be an awkward fit, according to Cowen analyst John Blackledge, who noted on Monday that Amazon "typically sells mass market products [and] services," while Peloton — whose entry-level bike costs $1,495 — is more of a "premium" brand.

The case for Nike: 

The Financial Times reports that the apparel giant weighed an offer for Peloton before it went public in 2019, but ultimately decided not to proceed. Could it take another look now? Maybe. But Nike has been focusing on its digital strategy. In December, it bought RTFKT, which makes non-fungible tokens, or NFTs, of collectibles and memes. And acquiring Peloton, which requires building complex machines, could add to the supply chain headaches that have been dogging the company.

The case for Apple: 

Apple took on Peloton in 2020 with the launch of its subscription service Fitness+, which is compatible with the Apple Watch. But Ives thinks joining forces would be a smart move, since it would rapidly ramp up Apple's customer base in this category and "catalyze the company's aggressive health and fitness initiatives."Apple has been shy about making flashy acquisitions. Its last high-profile deal was for Beats in 2014, which had a price tag of $3 billion. But it's sitting on plenty of cash, should it be tempted.

Maybe no one wins: 

Blackwells Capital encouraged Peloton to consider a sale. Those familiar with the matter say Peloton CEO John Foley will probably not sell(Foley and insiders have 80% voting control)without a persistent stock selloff.

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Attention will be on Foley when the company reports results from its latest quarter on Tuesday. Peloton is an acquisition target. Who might buy it?

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📈Peloton is an acquisition target. Who might buy it?Amazon, Nike, Apple Stock