During the epidemic, the Internet celebrity fitness company Peloton announced the suspension of production from the initial car is difficult to find to overcapacity, from the early days of the stock price has doubled five times to the current sharp decline of 85%, and even this year has plummeted by 30%.
After the bubble burst, in the face of this fragrant "fat meat" technology stock, buyers who were eyeing the tiger have shot out.
The news of the acquisition came out that the stock price soared sharply after hours
On Friday night, the Wall Street Journal quoted people familiar with the matter as reporting that the troubled Internet celebrity fitness company Peloton attracted the interest of a number of potential acquirers, including Amazon and Nike.
After U.S. stocks on Friday, especially at 17:10 ET, Peloton shares experienced unprecedented volatility, soaring more than 30% at one point. It was up more than 26% by the close.
The huge gains recovered the losses that CNBC reported in January that the company was facing layoffs and production stoppages.
According to people familiar with the matter, Amazon has approached Peloton about potential transactions. Other potential acquirers, such as Apple and large private equity buyers, are also on the sidelines, but no deal has yet been struck, people familiar with the matter said.
According to the Financial Times, Nike is also evaluating the acquisition. Nike said the takeover consideration is only preliminary and no negotiations with Peloton are currently underway.
A person familiar with the matter also told CNBC that Peloton has not yet launched a formal sales process, but there are people who are interested in the company.
But to be sure, without the support of Peloton CEO John Foley and other insiders, any deal would be difficult to complete because the company's dual-shareholder structure gives them veto power over all major decisions.
The "epidemic dividend" is no longer
After the outbreak of the epidemic in 2020, as the former "popular fried chicken", the influx of investors has caused Peloton stock to rise by more than 440% in 2020.
During the pandemic, the Blind Pursuit of Growth in the Great Leap Forward has caused the company to invest an overload of capital costs. Peloton shares have fallen more than 80 percent in the past 12 months and more than 70 percent in the past three months, and the company's market capitalization has fallen from more than $50 billion to its current $8 billion.
BMO Capital analyst Simeon Siegel warned:
We worry that stock prices reflect reality and give us a glimpse of its true value.
He has been unopposed about the growth momentum of the Peloton epidemic in the past few years, believing that there is too much moisture in it. Simeon has downgraded Peloton's stock rating from Market Perform to underperformance.
Last month, Blackwells Capital, which holds less than 5 percent of the company's shares, has written publicly urging the company to consider selling its shares.
In a letter to Peloton's board, Blackwells speculated that potential buyers could include Apple or Nike, which also asked Peloton to sack CEO John Foley.
Last November, Peloton cut its fiscal 2022 forecast after reporting a slowdown in revenue and a weakening in user growth. Foley warned at the time that it was becoming increasingly difficult to predict Peloton's growth because its previous huge successes had been driven by the pandemic.
But investors are gradually realizing that future growth will come with higher costs. The stock closed at $24.60 on Friday, well below its $29 IPO offering price.
In the past week, a number of media in the United States have revealed that Peloton is considering discontinuing several of its main fitness equipment. The reason for the suspension of production is that the supply exceeds demand, and the current user demand for Peloton has greatly exceeded the supply speed. At the same time, due to the company's financial constraints, it needs to stop production to quickly reduce costs.
The collapse of stock prices has brought market opportunities
Some analysts believe that the decline in Peloton's stock price has led the market to underestimate the value of the company's existing connected fitness user base.
Peloton has a strong user stickiness. Currently, the company has more than 6.2 million purely digital subscribers (i.e., only online members and no hardware purchases).
In addition, as of the end of last year, it had 2.5 million users who had purchased hardware products and paid courses at the same time.
What's more, Peloton's user viscosity is extremely strong, and its churn rate is less than 1%. Simply put, once Peloton is used, users don't leave.
These can be valuable assets for any potential acquirer.
Loop Capital Markets said in a Jan. 20 note to customers that Peloton's subscription business alone could significantly exceed the company's current market cap.
Analyst Daniel Adam said that if there are 2.5 million connected fitness users recently, the value of the business could be as high as $80 per share. He added that such valuations make Peloton more comparable to Netflix.
The acquisition plan is promising
Peloton is an attractive acquisition target for any company looking to go further into the healthcare industry.
Amazon has been investing in healthcare and wellness for years, including the launch of the Halo Health and Wellness Tracker.
And last year, Amazon added interactive home video workouts and meal plan coaching to Halo subscribers.
It's unclear how Amazon will leverage Peloton's hardware and technology once the acquisition is successful, but it's possible to integrate Peloton's products into its growing device division, which includes the popular Fire TV streaming stick, voice-activated Echo smart speakers and a range of connected home products.
Amazon's existing operations, such as the logistics division, could also further help Peloton solve ongoing supply chain problems, according to the Wall Street Journal. Peloton said users with its connected devices pay a peloton membership fee of $39 a month; once the acquisition is successful, it could theoretically be tied to Amazon's Prime membership.
In 2020 and 2021, Peloton invested heavily to increase its supply. The company also employs thousands of people to help handle customer service requests and delivery to your doorstep, but that has also led to an inflated cost structure for the company.
According to CNBC reported last month, Peloton is working with consulting firm McKinsey to find possibilities for cost cuts that could lead to layoffs. Its chief executive, John Foley, said in a statement that Peloton is "taking significant corrective actions to improve our earnings prospects and optimize our costs." ”
Once the deal closes, it could be called Amazon's biggest deal since it bought health food supermarket Whole Foods Market for $13.7 billion in 2017.